On May 3, 2013, we maintained our Neutral recommendation on
designer and manufacturer of self-propelled center pivot and
lateral move irrigation systems,
). It was based on expected benefits from recovery in the U.S.
construction sector, new Highway Bill, increase in backlog, and
robust demand for irrigation systems in the domestic markets.
However, non-recurrence of drought conditions in the future,
which can affect the company's ability to maintain similar
year-over-year growth, and ongoing instability in the
international markets remain concerns.
Lindsay reported second-quarter 2013 earnings per share of
$1.50, up 50% from the last-year quarter, led by higher demand
for irrigation equipment, expansion in irrigation margins, strong
pricing environment combined with increased productivity and cost
Demand for irrigation systems in the domestic markets will
remain high, driven by high crop prices and drought conditions,
leading to prolonged spending in irrigation equipment through
2013. According to the U.S. Department of Agriculture, U.S. farm
income will be a record $128.2 billion in 2013, up 14%.
This will be driven by high market prices and crop insurance
payments that will offset losses from the drought. Prices for
corn, wheat and soybeans are projected to remain historically
high and above the pre-2007 levels. U.S. construction is finally
stabilizing and is on the road to a much-awaited recovery. The
American Institute of Architects forecasts a 5% increase in
spending in 2013 for non-residential construction project and
7.2% for 2014. This in addition to the passage of the new Highway
Bill through 2014 will benefit Lindsay's infrastructural
Backlog increased 87% year over year to $159.3 million as of
the second-quarter end, and 82% sequentially. The backlog
includes strong domestic irrigation volume along with a $39.1
million contract in the Middle East consisting of irrigation
machines and ancillary equipment that is expected to be shipped
in the second half of fiscal 2013.
For fiscal 2012, approximately 36% of Lindsay's consolidated
revenues were generated from international sales. The ongoing
instability in the U.S. and international markets along with the
resulting global recessionary concerns and the slow economic
recovery could adversely affect the ability of farmers and
government agencies to buy and finance irrigation equipment and
highway infrastructure equipment.
The drought in the U.S was a significant factor in driving
sales in the first quarter. Even though the company expects 2013
results to benefit from prevailing weather condition in the U.S,
this is not expected to contribute to similar year-over-year
growth in the future.
Other Stocks to Consider
Lindsay Corporation currently retains a Zacks Rank #3 (Hold).
Other stocks in the same industry with favorable Zacks ranks are
Valmont Industries, Inc.
CNH Global NV
) which carry a Zacks Rank #1 (Strong Buy) while
Alamo Group, Inc.
) retains a Zacks Rank #2 (Buy).
ALAMO GROUP INC (ALG): Free Stock Analysis
CNH GLOBAL NV (CNH): Free Stock Analysis
LINDSAY CORP (LNN): Free Stock Analysis
VALMONT INDS (VMI): Free Stock Analysis
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