Deere & Co. (DE.N) reported better-than-expected earnings on Wednesday, and provided an upbeat outlook for the coming year, as strong sales to farmers worldwide offset a downturn in construction sales, especially in the United States.

Much of the gain came from international sales, which were lifted by increased demand for farm equipment in markets outside of North America -- but benefited as well from the decline of the U.S. dollar. Deere said more than a third of its 2007 sales came from outside the United States and Canada.

Markets where Deere experienced especially large gains in 2007 were in Central and South America, up 60 percent year over year, and Central Europe and CIS, up 52 percent.

Robert McCarthy, an analyst at R.W. Baird, called the results a blowout, and the company's shares rose in early trading even as the broader market fell.

Deere, the world's largest maker of agricultural machinery, said it earned $422.1 million, or $1.88 a share, in the fourth quarter, compared with $277.3 million, or $1.20 a share, last year. Net revenue rose 20 percent to $6.14 billion.

Analysts on average expected the Moline, Illinois-based company, which also makes earth-moving and forestry equipment, to report earnings of $1.54 a share on sales of $5.23 billion, according to Reuters Estimates.

Deere said sales in its agricultural and commercial and consumer divisions both jumped 35 percent during the quarter, while sales to the construction and forestry industries fell 11 percent.

Overall a very strong performance, Terry Darling, an analyst at Goldman Sachs, wrote in a note to investors.

The company said it expects first-quarter equipment sales to rise about 25 percent. It forecast that full-year 2008 profit would rise to $2.1 billion -- up more than 15 percent from the $1.8 billion it reported this year. It said the improved results would be a function of what it characterized as a substantial jump in farm cash receipts.

Farmers around the globe are enjoying high prices for many of their crops thanks, in part, to the surge in interest in biofuels. As their incomes have risen, they have rushed to buy newer, more powerful tractors and combines, lifting the earnings of Deere as well as rivals Agco Corp (AG.N) and CNH Global NV (CNH.N).

Deere said it benefited from the weakness of the U.S. dollar, adding 9 percentage points to sales outside the United States and Canada for the quarter and 7 points for the year.

The company's financial services unit reported net income of $96.9 million for the quarter, up from $87.5 million last year. However, Deere said the unit's full-year results were held back by a higher provision for credit losses -- an echo of the wider credit crunch roiling world markets in an otherwise upbeat report.

In what might be a positive sign for companies like Caterpillar Inc (CAT.N) and other makers of construction equipment, Deere is projecting that commercial building will remain stable next year, partially offsetting what it predicts will be continued pressure on the U.S. housing market.

Darling at Goldman Sachs predicted that the results would send Deere shares rallying as much as 5 percent. The stock was last up $1 at $146 in early trading on the New York Stock Exchange after climbing to a session high of $148.87.