Deere & Co reported a stronger-than-expected quarterly profit on Wednesday, and raised its full-year outlook, citing improving business conditions including a recovery in the hard-hit market for construction equipment.

Deere, whose shares rose more than 2 percent in premarket trading, expects to earn $1.6 billion in fiscal 2010, up from an earlier forecast of $1.3 billion, thanks in part to rebounding building markets.

The world's largest maker of tractors and harvesters predicted worldwide sales of its construction and forestry equipment would rise 30 percent for full-year 2010, saying U.S. construction-equipment markets are showing signs of stabilization.

But it also said a combination of healthy farm cash receipts, solid commodity prices and low interest rates would lift sales of its distinctive green farm equipment, especially in North and South America.

Deere reported a fiscal second quarter profit of $547.5 million, or $1.28 a share, for the fiscal second quarter ended April 30, up from $472.3 million, or $1.11 a share, for the comparable quarter last year.

Sales during the quarter rose 6 percent to $7.13 billion, led by a 52 percent jump in sales of construction and forestry equipment.

Stripping out one-time items related to U.S. healthcare reform, the company said it made $1.58 a share.

Analysts, on average, expected the Moline, Illinois-based company to report a profit before items of $1.09 a share, and a net profit of $1.04 a share, on sales of $6.62 billion, according to Thomson Reuters I/B/E/S.

Deere shares were up about 2 percent at $58.40 in premarket electronic trading.

(Reporting by James B. Kelleher; Editing by Derek Caney)