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Will Lindsay (LNN) Miss Earnings Estimates?

Zacks Equity Research

Lindsay Corporation (LNN) is set to report fiscal fourth quarter and fiscal 2013 results before the opening bell on Oct 10. Lindsay has achieved record results for the first three quarters of fiscal 2013. Let’s see how things are shaping up prior to the announcement.

Factors to Consider This Quarter

International demand for irrigation systems remains positive. Demand in Brazil and Middle East particularly remains strong. In Brazil, demand for irrigation equipment is fueled by a lower interest rate provided by the government to spur the agriculture industry. Furthermore, in some international markets, adoption of center pivot systems remains in nascent stages and the demand for more efficient water use in agriculture is on the rise. Being one of the market leaders, Lindsay Corporation is well positioned to capitalize on the demand.

Construction in the U.S. is stabilizing. The American Institute of Architects projects a 5% increase in spending in 2013 for non-residential construction projects and 7.2% for 2014. This bodes well for Lindsay’s infrastructure business going ahead.

Particularly, bid activity for Quickchange Moveable Barrier (:QMB) projects has picked up over the last several months. Management expects some improvement in QMB revenues in the fourth quarter of fiscal 2013, and expects some new orders in fiscal 2014. Total backlog increased a robust 80% year over year to $80 million, suggesting a solid finish to fiscal 2013.

On the flipside, Lindsay’s record results for the first three quarters of fiscal 2013 were driven by positive farmer sentiment toward capital investments and concerns over the past and potential drought conditions. As domestic demand normalizes along with lower expectations for commodity prices, it will be difficult for Lindsay to deliver similar year-over-year growth in the future. Furthermore, lower-margin international irrigation project backlog ill take a toll on the fourth quarter earnings.

Earnings Whispers?

Our proven model does not conclusively show that Lindsay Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as shown below.

Positive Zacks ESP: The Most Accurate estimate stands at 93 cents while the Zacks Consensus Estimate is at 91 cents. That is a difference of +2.20%.

Zacks Rank #4 (Sell): We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the machinery-farm sector that can be considered, as our model shows they have the right combination of elements to post an earnings beat this quarter:

AGCO Corporation (AGCO), Earnings ESP of +0.78% and a Zacks Rank #2 (Buy)

Terex Corp. (TEX), Earnings ESP of +1.70% and a Zacks Rank #3 (Hold)

The Babcock & Wilcox Company (BWC), Earnings ESP of +1.72% and a Zacks Rank #2 (Buy).

Read the Full Research Report on TEX
Read the Full Research Report on AGCO
Read the Full Research Report on LNN
Read the Full Research Report on BWC

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