In this April 2, 2012 photo, Derek Long uses a John Deere tractor to disk and cultivate a field in preparation for planting corn in Loami, Ill. A slowing global economy and the effects of a prolonged U.S. drought caught up to Deere & Co. in its fiscal third quarter, as its net income rose 11 percent but fell well short of Wall Street's expectations. (AP Photo/Seth Perlman)
In this April 2, 2012 photo, Derek Long uses a John Deere tractor to disk and cultivate a field in preparation for planting corn in Loami, Ill. A slowing global economy and the effects of a prolonged U.S. drought caught up to Deere & Co. in its fiscal third quarter, as its net income rose 11 percent but fell well short of Wall Street's expectations. (AP Photo/Seth Perlman)
In this Aug. 31, 2011 photo, the John Deere logo is seen on the back of a combine at the John Deere farming equipment exhibit area during the Farm Progress Show in Decatur, Ill. A slowing global economy and the effects of a prolonged U.S. drought caught up to Deere & Co. in its fiscal third quarter for 2012, as its net income rose 11 percent but fell well short of Wall Street's expectations. (AP Photo/Seth Perlman)
NEW YORK (AP) ? The effects of a slowing global economy caught up to Deere & Co. in its fiscal third quarter, as its net income rose 11 percent but fell well short of Wall Street's expectations.
Deere cut its revenue prediction for the year, and investors reacted swiftly. Shares dropped more than 7 percent.
Delays in production lines also hurt the world's largest producer of agricultural equipment. Ongoing drought in the Midwest had a minimal impact, executives said in a conference call with analysts.
The Moline, Ill., company, said Wednesday that it earned $788 million, or $1.98 per share for the quarter ended July 31, compared with $712.3 million, or $1.69 per share for the same period last year. Analysts expected $2.31 per share in the most recent quarter, according to FactSet.
Revenue rose 15 percent to $9.59 billion, missing analysts' average prediction of $9.61 billion.
Sales of tractors and other farm equipment, by far its biggest segment, rose 14 percent to $7.27 billion. Deere also makes a wide range of construction and forestry equipment, including backhoes and excavators. That segment's sales jumped 23 percent to $1.66 billion.
While those two segments improved markedly from a year ago, growth has slowed. In last year's third-quarter, sales of agricultural and turf equipment rose 22 percent and construction and forestry equipment revenue leaped 34 percent.
Sales from Deere's financial services segment, where it offers crop insurance, loans and other aid, rose 3 percent to $565 million.
Since it touches many important markets, it provides a unique look into the state of the U.S. and global economies. Deere's earnings have held up better in recent quarters than other U.S. companies that are considered economic bellwethers, such as United Parcel Service Inc. and 3M Co.
Deere said demand in once red-hot international markets like China and India cooled down. China demand is also weakening in part due to a delay in government subsidies reaching customers.
New products with more complicated technology slowed North American production by up to two weeks in the quarter. That, combined with an extremely early harvest, meant some farmers didn't get new machines in time. Canceled orders for new machines hurt the quarter and are partly to blame for a lower full-year revenue forecast.
Deere sees net income of $3.1 billion for the year ending in October, down from $3.35 billion forecast three months ago. Analysts estimate about $3.4 billion.
The ongoing drought nightmare for U.S. farmers is seen as a strong driver of growth for Deere in the next fiscal year starting in November. Although the prolonged drought has shrunk crop estimates and slightly affected demand for new Deere equipment, Deere said continued robust demand for corn, soybeans and other food should keep prices high and business strong.
In midday trading, Deere shares fell $6.02, or 7.5 percent, to $74.11.
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