Analysts covering Deere & Co. were pleasantly surprised by the company’s first-quarter earnings report this morning, which came in much stronger than forecast.

Net income attributable to Deere & Co. was $243.2 million, or $0.57 per share, for the first quarter ended January 31, compared with $203.9 million, or $0.48 per share, for the same period last year.

Net sales came in at $4.84 billion, easily beating analyst’s consensus of $4.3 billion ($0.18 per share). JP Morgan machinery analyst Ann Duignan had forecast sales of $4.36 billion, or $0.10 per share.)

“The beat vs. our estimate was driven primarily by higher than expected sales in ag equipment on continued strength in North America,” Duignan said in a note.

She also attributed Deere’s better than expected earnings on stronger operating margins in ag equipment, and better than expected performance in Financial Services.

Combined Ag & Turf Equipment sales in the first quarter were $3.61 billion, down 6% year-over-year.

Management’s raised its FY’10 outlook for equipment sales to be up 6-8% year-over-year, vs. prior guidance of down 1% and JP Morgan’s estimates of up 1%.

Henry Kirn, analyst for UBS, also noted that fiscal 1Q EPS of $0.57 well ahead of consensus of $0.19

He adds that the beat was largely driven by much better than expected margins at Ag & Turf — 9.8% operating margins in 1Q vs. UBS estimates of 4.3%. “Construction & Forestry results were largely inline with our expectations.

“Deere noted lower raw material costs, improved pricing and favorable F/X and product mix, partially offset by lower volumes and higher postretirement costs,” Kirn said in a note to investors. “Net equipment sales declined 7% year-over-year, including a 2% pricing benefit and a 5% F/X benefit. Financial Services net income grew by 81% year-over-year to $85 million due to improved financing spreads.”