A month has gone by since the last earnings report for Lindsay (LNN). Shares have added about 1.8% 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 catalysts.
Lindsay Q2 Earnings & Revenues Miss Estimates, Down Y/Y
Lindsay Corporation delivered adjusted net earnings of 2 cents per share in the second quarter of fiscal 2019 (ended Feb 28, 2019) compared to the 56 cents recorded in the year-ago quarter. Earnings significantly lagged the Zacks Consensus Estimate of 62 cents. Lower-than-expected sales volume in the North America irrigation segment due to the U.S.-China trade tensions and lower Road Zipper System sales affected the company’s performance. Lindsay’s share price dipped 8% to close at $85.11 on Apr 9.
Including the after-tax costs related to the company’s Foundation for Growth initiative, Lindsay incurred net loss of 32 cents in the reported quarter compared to the net earnings of 16 cents recorded in the prior-year quarter.
Lindsay generated revenues of $109.2 million, down 16% year over year. The revenue figure also missed the Zacks Consensus Estimate of $114 million.
Cost of operating revenues was down 10.8% year over year to $84.7 million. Gross profit declined 31% to $24 million from the $35 million witnessed in the year-earlier quarter. Gross margin came in at 22% compared to the 27% recorded in the year-ago quarter.
Operating expenses flared up 3.2% year over year to $29 million in the quarter under review. The company reported an operating loss of $4.5 million compared to the operating profit of $7.3 million recorded in the prior-year quarter.
Irrigation segment revenues declined 14% year over year to $95.8 million in the fiscal second quarter. North America irrigation revenues decreased 3% from the year-ago quarter, while international irrigation revenues were up 15% year over year. The segment’s operating income plunged 37% year over year to $7.5 million in the recently reported quarter. Its operating margin was affected by lower equipment sales volumes in North America, higher warranty costs and operational inefficiencies.
Infrastructure segment revenues dipped 27% year over year to $13.4 million, owing to soft Road Zipper System sales and road safety product sales. The segment reported operating loss of $0.4 million, primarily due to a year-over-year fall in Road Zipper System sales, compared to the operating income of $2.5 million recorded in the prior-year quarter.
Lindsay had cash and cash equivalents of $103 million at the end of the fiscal second quarter, flat year over year. The company utilized $40 million of cash in operating activities in the quarter compared with $9 million in the prior-year quarter. Lindsay had long-term debt of $116 million at the end of the reported quarter, stable year on year.
Lindsay’s backlog as of Feb 28, 2019, was $44.4 million compared with $90.2 million as of Feb 28, 2018. Approximately $14.8 million of the backlog reduction was owing to business divestitures and $28.5 million was from a lower backlog of Road Zipper System orders compared to the previous fiscal year.
In 2018, Lindsay had 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 a downward trend in fresh estimates. The consensus estimate has shifted -19.25% due to these changes.
Currently, Lindsay has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise 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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