On Sep 13, we reiterated our Neutral recommendation on
), a leading designer and manufacturer of self-propelled center
pivot and lateral move irrigation systems.
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International demand for irrigation systems remains positive.
Demand in Brazil and Middle East particularly remains strong. In
Brazil, demand for irrigation equipment is fueled by a lower
interest rate provided by the government to spur the agriculture
industry. Furthermore, in some international markets, adoption of
center pivot systems remains in nascent stages and the demand for
more efficient water use in agriculture is on the rise. Being one
of the market leaders, Lindsay Corporation is well positioned to
capitalize on the demand.
Construction in the U.S. is finally stabilizing. The American
Institute of Architects projects a 5% increase in spending in
2013 for non-residential construction projects and 7.2% for 2014.
This bodes well for Lindsay's infrastructure business going
Particularly, bid activity for Quickchange Moveable Barrier (QMB)
projects has picked up over the last several months. Management
expects some improvement in QMB revenues in the fourth quarter of
fiscal 2013, and expects some new orders in fiscal 2014. Total
backlog increased a robust 80% year over year to $80 million,
suggesting a solid finish to fiscal 2013.
On the flipside, Lindsay has achieved record results for the
first three quarters of fiscal 2013, driven by positive farmer
sentiment toward capital investments and concern over the past
and potential drought conditions. As domestic demand normalizes
along with lower expectations for commodity prices, it will be
difficult for Lindsay to deliver similar year-over-year growth in
the future. Furthermore, Lindsay expects gross margin headwinds
in the fourth quarter due to lower-margin international
irrigation project backlog planned manufacturing maintenance
Other Stocks to Consider
Other players that are worth a mention in the industry are
Alamo Group, Inc.
), both carrying a Zacks Rank #1 (Strong Buy), while
) retains a Zacks Rank #2 (Strong Buy).