Wednesday morning, Deere (NYSE:DE) reported a 19% increase in profit on a 6% decline in first-quarter revenue. Operating profit improved two percentage points, to 11.5%. Let's dig into the story behind these numbers.

What happened?
Deere reduced expenses faster than revenue declined. Cost of sales fell 9.5% and trade receivables and inventories 20% over last year's first quarter. Interest expense also fell 20%, thanks to a lighter debt load and lower interest rates. Cash used in operations fell from $1.6 billion to $318 million.

"We are clearly seeing benefit from efforts to win customers with advanced new products while taking cost and asset discipline to an even higher level," CEO Samuel Allen said in a press statement.

What's next?
Investors agree there's been progress. Shares of Deere soared 5% Wednesday after management revised guidance to account for increased production and a fatter backlog for its agricultural equipment.

The gains seem to make sense. Earlier this month, analysts upgraded agribusiness giant Archer Daniels Midland (NYSE:ADM) on reports that farmers were planning to grow more corn this year. Corn Products International (NYSE:CPO), a corn refiner, said recently that it expects modest volume growth in North America during 2010.

"Our outlook for industry sales of agricultural equipment in U.S. and Canada is comparable to 2009. This is up significantly from our previous forecasts of down about 10%. The strength we've seen in our order books is driving this increase," said Marie Ziegler, Deere's vice president of investor relations, in Wednesday's call with analysts.

Officially, Deere raised its 2010 outlook to $1.3 billion in net income on a 6% to 8% increase in equipment revenue. That's a vast improvement over a November prediction of $900 million in earnings on a 1% decline in full-year revenue, The Wall Street Journal reports.

Would you buy Deere?
Fools still like Deere's shares today:

Metric

Deere & Company

CAPS stars (out of 5)

****

Total ratings

2,471

Percent Bulls

95.1%

Percent Bears

4.9%

Bullish pitches

361 out of 385

P/E Ratio

27.82

Expected 5-Year Growth Rate

9.75%

Competitors

Caterpillar (NYSE:CAT)
CNH Global (NYSE:CNH)
Kubota (NYSE:KUB)

Sources: CAPS, Yahoo! Finance.

CAPS All-Star FreeMortal predicted a recovery for the shares in early January:

It has persevered through too many negative events in the past few months. We have climbed the wall of worry. Big green John Deere is more than just tractors, combines, and farming equipment. They make plenty of yellow monsters as well. The world will need them.

Richrox1 agrees, viewing Deere as a stimulus play. "Farmers are flush with cash and infrastructure work, compliments of the Economic Recovery Act, [which] will boost [Deere's] non-ag construction products," this Fool wrote in December.

Now it's your turn to weigh in. Would you buy Deere today? What were you expecting from Wednesday's earnings report? Make your voice heard using the comments box below.