On Dec 19, we issued an updated research report on Lindsay Corporation LNN. The company’s performance will be driven by focus on growth objectives, business simplification and capital-allocation plan. Strong order activity also remain a tailwind.
Let’s illustrate these factors in detail.
Business Simplification to Spur Growth
Lindsay remains focused to simplify its business in order to improve productivity. The company’s Foundation for Growth initiative launched earlier this calendar year continues to progress and is bringing positive changes for the company. It also completed the divestiture of its LAKOS and Watertronics businesses.
The company successfully closed its manufacturing plant in Nebraska. In addition to these actions, Lindsay also completed the divestiture of SPF, a water resource-consulting firm located in Idaho, whose primary customer base was not aligned to the mechanized irrigation market.
Focus on Growth Objectives Support Lindsay
Lindsay will likely benefit from its focus on growth objectives, which include setting strategic direction, defining priorities, and improving the overall operating performance. A key financial objective is to achieve operating margin performance between 11% and 12% by fiscal 2020.
The company expects to incur additional costs regarding this initiative over the next several quarters. These additional costs are anticipated to be recovered through improved operating income in fiscal 2020.
Capital Allocation Plan a Tailwind
Lindsay’s capital-allocation plan is to continue investing in revenues and earnings growth, combined with a strategic process for enhancing returns to stockholders. For fiscal 2019, the company projects its capital expenditures at $15-$20 million, including equipment replacement, productivity improvements and new product development.
Strong Order Activity to Drive Results
Lindsay’s infrastructure business continues to generate growth on the back of strong order activity, comprising the Alex Fraser Bridge and Road Zipper projects. Further, the company commenced production on the San Rafael Bridge during third-quarter fiscal 2018 which is expected to generate revenues in first-quarter fiscal 2019. Also, demand for the company’s transportation safety products continues to be driven by population growth and need for improved road safety.
Share Price Performance
Lindsay’s shares have outperformed the industry with respect to price performance over the past year. The stock has gained around 9%, while the industry has recorded loss of around 8% during the same time frame.
Zacks Rank & Other Stocks to Consider
Lindsay currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same sector are DMC Global Inc. BOOM, CECO Environmental Corp. CECE and W.W. Grainger, Inc. GWW. All these stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
DMC Global has a long-term earnings growth rate of 20%. The stock has gained around 59% in a year’s time.
CECO has a long-term earnings growth rate of 15%. The company’s shares have surged 40% during the past year.
Grainger has a long-term earnings growth rate of 12.4%. Its shares have been up 18% in the past year.
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