Soaring demand for food production has been a boon for
), which hit a new 52-week high after announcing strong fiscal
first-quarter results on January 8. The quarter included a positive
earnings surprise of more than 53%.
This Zacks Rank #1 (Strong Buy) manufacturer of irrigation
equipment should be able to sustain its price momentum going
forward, as is evidenced from its expected long-term earnings
growth rate of 13.5%.
Lindsay reported first-quarter 2013 (ended Nov 30) earnings per
share of $1.15, beating the Zacks Consensus Estimate of 75 cents
and increasing five-fold from last year's 23 cents. The earnings
increase was led by higher demand for domestic irrigation systems,
expansion in irrigation margins, a strong pricing environment and
fixed cost leverage on higher sales.
Revenues improved 24% year over year to $147.4 million, ahead of
the Zacks Consensus Estimate of $130 million. The year-over-year
increase in revenues stemmed from a 33% improvement in total
irrigation equipment revenues, which was led by a 59% increase in
Domestic irrigation revenues. However, infrastructure revenues fell
29% in the quarter.
Lindsay expects positive farmer sentiment and increased farm
incomes & commodity prices to have a positive impact in fiscal
2013. Lindsay also expects long-term demand to remain high, driven
by increased food production and efficient water use. Even though
infrastructure sales declined during the quarter, it is expected to
pick up through the remainder of the year.
Clear Upward Trend in Earnings Estimates
The past 7 days have seen upward revisions from 6 of 7 estimates
for fiscal 2013, sending the Zacks Consensus Estimate higher by
14.1% to $4.70 a share. This indicates a year-over-year increase of
approximately 39%. The Zacks Consensus Estimate for fiscal 2014
increased 13.9% to $5.01 in that time, as 4 of 6 estimates were
raised. This suggests year-over-year growth of 6.6%.
Valuation is Expensive but Justified
Lindsay's valuation looks expensive compared to its peers with
respect to most metrics. The stock is currently trading at a
forward P/E of 19.15x and has a trailing twelve months P/E of
20.92x, which are both at a premium to peer group averages.
Meanwhile, the price-to-book of 3.51x and price-to-sales of 1.98x
are above peer group averages. While investors can get jittery
looking at this valuation, the long-term earnings potential remains
Lindsay has a 1-year ROE of 18%, higher than its peer group average
of 14.8%, reflecting efficient capital deployment.
Sound Technicals and Healthy Performance
Lindsay is currently trading well above its 50- and 200-day moving
averages, which stand at $78.30 and $69.40, respectively.
Interestingly, following a golden crossover in the March 2012, the
50-day moving average continues to read higher than the 200-day
moving average, manifesting the bullish trend.
On the performance front, Lindsay has outperformed the S&P 500
over the past year and has delivered a year-to-date return of 12.3%
versus 3.3% for the benchmark.
Omaha, Nebraska-based Lindsay is a leading designer and
manufacturer of self-propelled center pivot and lateral move
irrigation systems, which are used principally in agriculture to
increase or stabilize crop production while conserving water,
energy and labor. The company also manufactures and markets various
infrastructure products, which include movable barriers for traffic
lane management, crash cushions, preformed reflective pavement
tapes and other road safety devices. Operating since 1955, the
company now has a market cap of roughly $1.16 billion. The company
sells its branded irrigation products primarily to a worldwide
independent dealer network, who in turn resell to their customers.
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