We downgrade our recommendation on
) from Outperform to Neutral based on the volatility in agriculture
Recently, Lindsay reported excellent first-quarter 2012 results.
Adjusted EPS of 60 cents per share were up 58% year over year, and
outperformed the Zacks Consensus Estimate of 46 cents. Total
revenue in the quarter increased 34% year over year to $119
million, and beat the Zacks Consensus Estimate of $102 million. The
increase was primarily attributable to a 68% rise in total
irrigation equipment revenues, driven by a 66% surge in domestic
irrigation revenues and a 71% spike in international irrigation
Lindsay is optimistic about positive farmer sentiment. Moreover,
the company's long-term drivers such as higher food production,
water use efficiency and transportation safety products, and
population growth are expected to hold course.
Lindsay will continue to focus on opportunities for growth both
organically and through acquisitions. The company's recent business
combinations include IRZ Consulting, LLC on August 26, 2011, WMC
Technology Limited on November 3, 2010, Digitec Inc. on August 31,
2010 and Watertronics, LLC on January 24, 2008. These acquisitions
reflect the execution of the company's strategy to grow its
irrigation business with additional proprietary irrigation
products. In addition, on August 28, 2009, the company completed
the acquisition of certain assets of GE Transportation Systems
Global Signaling, LLC. The company sees opportunities to create
shareholder value through the acquisition of product line
extensions that will enhance the company's highway safety product
offering across the globe.
Lindsay also reduced its debt to $7.5 million as of November 30,
2011 from $11.8 million as of November 30, 2010, thereby improving
the debt-to-capitalization ratio to 2.7% from 5% in the
However, the company nonetheless cautioned that, in fiscal 2012,
the business will be subject to the volatility recently witnessed
in agriculture commodity prices, besides government spending
decisions in infrastructure.
During fiscal 2011, Lindsay experienced pricing volatility
regarding purchases of certain commodities, in particular steel and
zinc products, used in the production of its products. Though the
cost outlook for commodities used in the production of the
company's products is not certain, management believes that it can
manage these inflationary pressures by introducing appropriate
sales price adjustments and by actively pursuing internal cost
reduction efforts, while further refining its inventory and raw
materials risk management system. However, competitive market
pressures may affect the company's ability to pass price
adjustments to its customers.
The quantitative Zacks #3 Rank (short-term Hold
rating) for the company indicates no clear directional pressure on
the shares over the near term.
Omaha, Nebraska-based Lindsay Corporation 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 road
safety products. The company competes with
Valmont Industries Inc.
LINDSAY CORP (
): Free Stock Analysis Report
VALMONT INDS (
): Free Stock Analysis Report
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