) reported disappointing results for the second quarter of fiscal
2014 (ended Feb 28, 2014). Earnings per share came in at $1.04,
down 31% year over year. The reported figure also lagged the
Zacks Consensus Estimate of $1.13 per share.
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Total revenue decreased 13% year over year to $152.8 million,
missing the Zacks Consensus Estimate of $165 million. Total
irrigation equipment revenue decreased 16% while infrastructure
revenues increased 32%. Domestic irrigation revenues and
international irrigation revenues registered a decline of 21% and
Cost of operating revenues decreased 12% to $110 million. Gross
profit declined 15% to $42.6 million with gross margin
contracting 80 basis points (bps) to 27.9%. Irrigation margin
dipped 1 percentage point due to fixed cost deleverage on lower
sales and a higher mix of international sales. Infrastructure
margins increased 7 percentage points due to sales mix and
leverage on higher sales.
Operating expenses went up 4% to $21.8 million in the quarter due
to increased costs related to the Lakos acquisition, partly
offset by reduction in incentive compensation and advertising
expenses. Operating income in the quarter declined 29% year over
year to $20.9 million. Operating margin in the quarter was 13.7%,
down 310 bps from 16.8% from the prior-year quarter.
Lindsay Corp.'s backlog at the quarter-end was $89.3 million,
compared with $159.3 million at the end of the year-ago quarter.
Decrease in backlog in the U.S. and international irrigation
markets offset the rise in infrastructure backlog. The
infrastructure backlog includes a $12.8 million Road Zipper
System order from the Golden Gate Bridge.
Cash and cash equivalents were $165.5 million at the end of the
second quarter of fiscal 2014 versus $159.5 million at the end of
the second quarter of fiscal 2013. The company generated $32
million in cash from operating activity in the second quarter of
fiscal 2014, as against $26 million in the prior-year quarter.
Lindsay Corp. has no debt at present.
During the quarter the company repurchased 78,520 shares for $6.6
Lindsay Corp. will benefit from consistent focus on managing
margins and the sustained momentum in the irrigation market for
the remainder of the year. In addition, population rise,
increased food production and efficient water use will likely
drive the company's growth in the long run.
Moreover, Lindsay Corp. is committed to increase shareholder
returns through execution of the capital allocation plan outlined
in Jan 2014. Continued progress toward sustainable and profitable
performance in the infrastructure segment, including enhanced
selling methods in the markets will also drive growth.
The company's current estimate for capital expenditures for 2014
lies between $15 million to $20 million. Capital expenditure
investments plan includes the manufacturing operations in Turkey,
which will be operational early in fiscal 2015. This is in tandem
with the company's long-term growth plans in Europe, Africa, the
Middle East and other developing regions. Lindsay Corp. will
continue to invest in growth and productivity, both organically
and through acquisitions.
However, lower grain prices and the political tensions in Russia
and Ukraine are likely to pressure irrigation demand in the
second half of the year. The current forecast for 2014 U.S. net
farm income down 27% from 2013. For the remainder of fiscal 2014,
Lindsay Corp. expects U.S. irrigation equipment revenues to
remain below the previous year's level. Moreover, lower
expectations for U.S. irrigation sales in 2014 and lack of
visibility into the primary selling season for irrigation
equipment remain concerns.
Omaha, NE-based Lindsay Corp. is a leading designer and
manufacturer of self-propelled center pivot and lateral move
irrigation systems, which are primarily used for agriculture
purposes to increase or stabilize crop production while saving
water, energy and labor at the same time.
Lindsay Corp. carries a Zacks Rank #4 (Sell). Some better-ranked
stocks worth considering in the sector include
Alamo Group, Inc.
The Manitowoc Company, Inc.
). All of these have a Zacks Rank #2 (Buy).