On Mar 25, 2014, Zacks Investment Research downgraded Lindsay Corporation (LNN), a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems, to a Zacks Rank #4 (Sell).
Why the Downgrade?
Lindsay Corporation has been witnessing downward estimate revisions after reporting a 31% year-over-year fall in its earnings per share to 79 cents in the first quarter of fiscal 2014. The decline was due to significantly lower agricultural commodity prices, which dragged domestic irrigation revenues.
Total revenue remained flat year over year at $147.7 million. Sales for the remainder of the fiscal year remain uncertain due to lack of visibility into the primary selling season for irrigation equipment.
In addition, domestic irrigation sales in 2014 are likely to be affected by decline in crop prices and tough comparisons. Sales were particularly strong in 2013 due to drought-like conditions across the U.S. and Corn Belt, which led to a rise in crop prices. Lower commodity prices are dampening farmer sentiment and management noted that U.S. irrigation orders have further slowed down from the drought-driven pace a year ago. Management anticipates competitive pricing to continue in 2014 and thereby weigh on gross margins.
Lindsay Corporation expects demand in the infrastructure segment to remain limited due to controlled government infrastructure spending and project delays. The company does not foresee a major turnaround in government infrastructure spending in fiscal 2014.
Other Stocks to Consider
Some better-ranked machinery makers include Alamo Group, Inc. (ALG), Xylem Inc. (XYL) and Altra Industrial Motion Corp. (AIMC). All these stocks have a Zacks Rank #2 (Buy).