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Why Is Lindsay (LNN) Down 4.2% Since Last Earnings Report?

A month has gone by since the last earnings report for Lindsay (LNN). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lindsay due for a breakout? 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 Earnings & Sales Beat Estimates in Q2, Up Y/Y

Lindsay delivered earnings per share of $1.32 in second-quarter fiscal 2022, beating the Zacks Consensus Estimate of $1.31. The bottom line increased 22% year over year on solid demand for irrigation equipment.

Lindsay generated revenues of $200 million, up 39% from $144 million reported in the year-ago quarter. The top line surpassed the Zacks Consensus Estimate of $182 million.

The company’s backlog as of Feb 28, 2022, was $111 million compared with $101.4 million witnessed as of Feb 28, 2021.

Operational Update

Cost of operating revenues rose 54% year on year to $157 million. Gross profit was up 5% to $43 million from the year-earlier quarter’s levels. Gross margin came in at 21.5% compared with the year-ago quarter’s 28.6%.

Operating expenses were $25 million during the fiscal second quarter, flat year over year. Operating income was $18 million, up from the prior-year quarter’s $16 million.

Segment Results

The Irrigation segment revenues increased 52% year over year to around $181 million in the fiscal second quarter. North America irrigation revenues rose 26% from the year-ago quarter’s levels to $101 million, primarily on higher average selling prices. International irrigation revenues soared 108% year over year to $80 million on higher unit sales volumes and higher selling prices. The segment’s operating income increased 37% year on year to $24.7 million.

The Infrastructure segment revenues declined 23% year over year to $19 million on lower Road Zipper System sales and lease revenue. The segment reported an operating income of $0.3 million, down 95% year over year. The downside was caused by lower revenues and a less favorable margin mix of revenues compared with the prior-year quarter’s levels and under absorbed overhead costs.

Financial Position

Lindsay had cash and cash equivalents of nearly $69 million at the end of the fiscal second quarter compared with $111 million in the prior-year quarter’s end. The company’s long-term debt stood at around $115 million at the end of the fiscal second quarter, flat year over year.

Outlook

Lindsay expects to continue witnessing robust demand for irrigation equipment in North America, supported by strong agricultural commodity prices and farm income projections. In the infrastructure business, the company anticipates an increase in project activity in the second half of fiscal 2022. However, raw material cost inflation and supply chain challenges will likely persist in the near term.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 8.5% due to these changes.

VGM Scores

Currently, Lindsay has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lindsay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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