A month has gone by since the last earnings report for Lindsay (LNN). Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lindsay due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Lindsay Q3 Earnings & Revenues Miss Estimates, Down Y/Y
Lindsay delivered adjusted net earnings of 50 cents per share in the third quarter of fiscal 2019 (ended May 31, 2019) compared to the earnings per share of $1.66 recorded in the year-ago quarter. Earnings significantly lagged the Zacks Consensus Estimate of 81 cents. Lower commodity prices and trade uncertainty weighed on irrigation equipment demand during the reported quarter. Also, strong Road Zipper System sales in the year-ago quarter led to the challenging year-over-year comparison.
Including the after-tax costs related to the company’s Foundation for Growth initiative, net earnings for the quarter were 27 cents in the quarter compared with the net earnings of 96 cents recorded in the prior-year quarter.
Lindsay generated revenues of $121.1 million, down 29% year over year. The revenue figure also missed the Zacks Consensus Estimate of $137 million.
Cost of operating revenues was down 22.8% year over year to $91 million. Gross profit plunged 41.7% to $30 million from the $51.5 million witnessed in the year-earlier quarter. Gross margin came in at 24.7% compared to the 30.4% recorded in the year-ago quarter.
Operating expenses declined 21.7% year over year to $25.5 million in the fiscal third quarter. The company reported an operating income of $4.5 million compared to the $18.8 million recorded in the prior-year quarter.
Irrigation segment revenues declined 23% year over year to $98.6 million in the fiscal third quarter. North America irrigation revenues increased 5% from the year-ago quarter while International irrigation revenues decreased 13% year over year. The segment’s operating income was down 36% year over year to $11.6 million. Its operating margin was affected by lower equipment sales volumes and replacement parts in North America.
Infrastructure segment revenues plummeted 45% year over year to $22.4 million, owing to year-over-year soft Road Zipper System sales. The segment reported operating income of $3.6 million compared to the operating income of $14.4 million recorded in the prior-year period.
Lindsay had cash and cash equivalents of $110.8 million at the end of the fiscal third quarter compared to the $111.8 million recorded at the end of the year-ago quarter. The company utilized $19.6 million of cash in operating activities in the quarter compared with cash inflow of $8 million in the prior-year quarter. Lindsay had a long-term debt of $116 million at the end of the reported quarter, stable year on year.
Lindsay’s backlog as of May 31, 2019, was $42.5 million compared with $55.8 million as of May 31, 2018. Approximately $12.4 million of the backlog reduction was due to business divestitures.
In 2018, Lindsay introduced a performance improvement initiative — Foundation for Growth — with the objective of simplifying its business. One of its key financial objectives is to achieve operating margin performance between 11% and 12% in fiscal 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -22.95% due to these changes.
Currently, Lindsay has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Lindsay has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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