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Lindsay's Q4 & FY13 Earnings Miss Estimates

Zacks Equity Research

Lindsay Corporation’s (LNN) earnings per share increased 19% to 81 cents in the fourth quarter of fiscal 2013 from 68 cents a share in the year-ago quarter. Reported results were well short of the Zacks Consensus Estimate of 91 cents per share.

Operational Update

Total revenue improved 16% year over year to $148 million, missing the Zacks Consensus Estimate of $151 million. The year-over-year increase in revenues stemmed from a 19% improvement in total irrigation equipment revenues, which in turn was mainly due to strength in international markets.

Domestic irrigation revenues declined 4%, while international irrigation revenues shot up 44% driven by a robust demand in international markets. Infrastructure revenues edged up 2% during the quarter.

Cost of operating revenues increased 16% to $109.8 million. Gross profit improved 18% to $38.6 million with gross margin expanding 40 basis points to 26%. Irrigation margin dipped 1 percentage point as higher domestic margins were offset by higher mix of low margin international sales. Infrastructure margins increased 8 percentage points on larger mix of Road Zipper sales.

Operating expenses went up 14% to $22.8 million in the quarter due to higher personnel and incentive compensation, acquisition expenses and selling expenses associated with higher revenues. Operating income in the quarter improved 24% to $15.8 million. Operating margin in the quarter was 10.6%, expanding 70 basis points to 10.6% from the prior-year quarter.

Lindsay’s backlog at the end of fiscal 2013 was $66.5 million compared with $57.1 million at the end of fiscal 2012. Increase in backlog in other international irrigation markets and infrastructure was offset by a dip in backlog on U.S. irrigation markets. The backlog includes $4.7 million remaining from the Iraq order announced in the second quarter.

Financial Position

Cash and cash equivalents were $151.9 million at the end of fiscal 2013 compared with $143 million as of fiscal 2012 end. The company generated $57.5 million in cash from operating activity in fiscal 2013 compared with $52 million in the prior fiscal. Lindsay paid back debt of $4.3 million during the year and has no debt at present.

Fiscal 2013 Performance

Lindsay reported earnings of $5.47 per share in fiscal 2013, up 62% year over year, but short of the Zacks Consensus Estimate of $5.58. Revenues increased 25% to $690.8 million, but failed to meet the Zacks Consensus Estimate of $695 million.


Demand for Lindsay’s products will increase, driven by soaring demand for food production owing to worldwide population growth, efficient water use, biofuel production and improving transportation infrastructure.

U.S. irrigation sales is expected to be lower in 2014 due to lower commodity prices as well as challenging comparisons to the record results in the first three quarters of 2013. Demand for irrigation systems in the international markets will remain strong due to lower mechanized irrigation penetration. The acquisition of the Lakos brand of filtration products will also provide additional growth opportunities.

Our Take

Recovery in the U.S. construction sector and new projects will benefit Lindsay’s infrastructure business. Lindsay will continue to benefit from the strong demand for irrigation systems in the international markets. 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. The company has a strong balance sheet with no debt. This will enable the company to invest in organic growth opportunities while continuing to pursue accretive acquisitions that add new businesses and product lines as well as executing potential share buybacks or increasing dividend.

On the flipside, Lindsay has delivered record results for the first three quarters of fiscal 2013, driven by potential drought conditions. As domestic demand normalizes along with lower expectations for commodity prices, it will put Lindsay against tough comparison and will be difficult for Lindsay to deliver similar year-over-year growth in the future.

Omaha, Neb.-based Lindsay Corporation is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems, which are used principally for agriculture to increase or stabilize crop production while conserving water, energy, and labor.

Lindsay retains a Zacks Rank #4 (Sell).

Other stocks in the same industry where Lindsay operates with favorable Zacks ranks are Kubota Corporation (KUBTY), which holds a Zacks Rank #1 (Strong Buy), while AGCO Corporation (AGCO) and The Babcock & Wilcox Company (BWC) carry a Zacks Rank #2 (Buy).

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

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