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Bear of the Day: Lindsay Corporation (LNN)

Benjamin Rains

Shares of Lindsay Corporation (LNN) have fallen roughly 16% over the last 12 months, which falls below its industry’s 5% average decline. The irrigation and road safety equipment maker is coming off a worse-than-expected quarter on the back of U.S.-China trade war worries, which have only escalated since it reported its second-quarter fiscal 2019 results in early April.   

Overview & Recent Performance

Lindsay Corporation is a manufacturer and distributor of irrigation and infrastructure equipment and technology. The company is well-known for its massive Zimmatic irrigation equipment, and other offerings, that have become popular with farmers around the world. The Omaha, Nebraska-based company also operates an infrastructure division, which includes transportation safety and roadway maintenance products such as energy-absorbing crash cushions and moveable barriers.

The company has been negatively impacted by the ongoing trade fight between the U.S. and China that has hurt farmers and caused uncertainty. Lindsay Corporation’s revenue fell 16% last quarter, some of which was attributed to previously announced business divestitures. Meanwhile, LNN posted a quarterly net loss of $3.4 million, or $0.32 per diluted share, down big from positive earnings of $0.16 per share in the prior-year period.

Lindsay Corporation did report positive adjusted Q2 earnings and saw its international irrigation segment revenue jump 15%, driven by strong sales in developing markets. Nonetheless, shares of LNN have dipped roughly 4% since it reported and 15% in 2019. “North America irrigation sales volumes were significantly lower than anticipated as the unresolved US-China trade dispute contributed to a further decline in farmer sentiment,” CEO Tim Hassinger said in prepared remarks last quarter.

Overall, shares of LNN are down roughly 4% over the past five years, which falls well below its industry’s 30% climb and the S&P 500’s 53% expansion. Lindsay Corporation stock closed regular trading Tuesday at $80.61 per share, down roughly 26% off its 52-week intraday trading highs.



Outlook & Earnings Trends

Looking ahead, the company’s current-quarter revenue is projected to fall over 19% to $136.87 million, based on our current Zacks Consensus Estimate. The firm’s full-year fiscal 2019 revenue is then expected to slip nearly 14% to $472.03 million. Peeking ahead to fiscal 2020, the company is projected to see its full-year revenue pop 6% above our 2019 estimate to reach $500.79 million. This, however, would still fall well below 2018’s $547.71 million.

Moving onto the bottom end of the income statement, LNN’s adjusted quarterly EPS figure is projected to plummet over 41.5% to $0.97 per share. The firm’s adjusted fiscal 2019 earnings are expected to fall roughly 37%. Luckily for current long-term LNN holders, the company’s earnings are projected to soar 70% above our 2019 estimate in fiscal 2020.

With that said, the company’s earnings estimate revision activity has moved completely in the wrong direction recently. Investors will also notice just how much its quarterly and full-year earnings estimates have come down.



Bottom Line

Lindsay Corporation’s negative earnings estimate revision activity helps it earn a Zacks Rank #5 (Strong Sell) at the moment. The company also rocks a “D” grade for Value and an “F” for Growth in our Style Scores system. LNN is trading at 28.2X forward 12-month Zacks Consensus EPS estimates, which marks a premium compared to its industry’s 14.5X average and its own five-year median of 26.5X.

LNN’s 1.6 price/sales ratio also comes in above its industry’s 0.8 average. With all this in mind, investors might want to stay away from Lindsay Corporation stock at the moment, especially amid increased trade war-related woes.

Investors still interested in the Manufacturing - Farm Equipment industry might instead consider AGCO Corporation (AGCO), which is a Zacks Rank #2 (Buy) at the moment and #1 (Strong Buy) ranked Kubota Corp. (KUBTY)—or perhaps even Deere & Company (DE) that is a Zacks Rank #3 (Hold).

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