Strong 3Q Earnings for Lindsay
Lindsay Corporation’s (LNN) earnings per share increased 50% to $2.01 in the third quarter of fiscal 2013 from $1.47 a share in the year-ago quarter. Reported results were well ahead of the Zacks Consensus Estimate of $1.78 per share.
Operational Update
Total revenue improved 28% year over year to $219.5 million, beating the Zacks Consensus Estimate of $201 million. The year-over-year increase in revenues stemmed from a 34% improvement in total irrigation equipment revenues. Moreover, increased demand from higher commodity prices and farm income resulted in revenue growth.
Domestic irrigation revenues rose 12% and international irrigation revenues increased an impressive 88%, driven by a robust demand in international markets. On the other hand, infrastructure revenues fell 17% during the quarter.
Cost of operating revenues increased 27% to $156 million. Gross profit improved 29% to $63 million with gross margin expanding 20 basis points to 28.7%. Irrigation margin improved modestly, while infrastructure margins declined roughly 3% on lower mix of Road Zipper sales.
Operating expenses went up 16% to $23.5 million in the quarter. Operating income in the quarter improved 37% to $39.5 million. Operating margin in the quarter was 18%, expanding 130 basis points to 16.7% in the prior-year quarter.
Lindsay’s backlog at the end of third quarter 2013 was $80 million compared with $44.5 million at the end of third quarter 2012.
Financial Position
Cash and cash equivalents were $170 million as of May 31, 2013 compared with $119.7 million as of May 31, 2012. The company generated $40.7 million in cash from operating activity for the period of nine months ending May 31, 2013 compared with $25.9 million in the prior-year comparable period. Total debt was $1.07 million as of May 31, 2013, compared with $5.3 million as of May 31, 2012.
Outlook
Lindsay expects long-term growth from a modest improvement in recent sales trends. 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. Although in the near term, downward pressure on agricultural commodity prices remains a concern, Irrigation equipment demand for 2014 and beyond will be driven by farmer sentiment, influenced by weather conditions, crop prices and stock-to-use ratios.
In the irrigation segment, Lindsay anticipates gross margin headwinds in the fourth quarter due to lower margin international irrigation project backlog and planned manufacturing maintenance projects. For the fourth quarter, the company also expects a heavier mix of lower margin international sales. In addition, the environment for infrastructure sales remains difficult.
Omaha, NE-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 #1 (Strong Buy).
Other stocks in the same industry where Lindsay operates with favorable Zacks ranks are Kubota Corporation (KUB) which holds a Zacks Rank #1 (Strong Buy), while AGCO Corporation (AGCO) and Alamo Group, Inc. (ALG) carry a Zacks Rank #2 (Buy).
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