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Lindsay (LNN) Beats on Q2 Earnings, Revenue Estimates

Lindsay CorporationLNN reported second-quarter fiscal 2017 (ended Feb 28, 2017) earnings of 47 cents per share compared with an adjusted earnings of 41 cents per share in the prior-year quarter. Further, earnings surpassed the Zacks Consensus Estimate of 38 cents, generating a positive earnings surprise of around 23.7%. Including after tax environmental remediation expenses, the company had reported a loss per share of 37 cents in the prior year quarter.

The irrigation equipment manufacturer reported revenues of $124 million, beating the Zacks Consensus Estimate of $119 million. Revenues increased around 2.8% on a year-over-year basis.

Irrigation segment revenues were up 3% year over year to $106 million. U.S irrigation revenues declined 15%, while international irrigation revenues recorded 46% growth. Domestic irrigation revenues declined mainly due to harsh winter weather conditions in the Northwest, which resulted in lower irrigation equipment unit volume and lower revenue from other irrigation businesses.

Lindsay Corporation Price, Consensus and EPS Surprise

Lindsay Corporation Price, Consensus and EPS Surprise | Lindsay Corporation Quote

International irrigation revenues increased primarily on the back of improved demand and project activity in South America, Africa and the Commonwealth of Independent States region. Infrastructure segment revenues went up 2% to $17.9 million as increased sales volume in road safety products and higher Road Zipper system sales, and lease revenue were offset by decline in sales volume for rail products.

Operational Update

Cost of operating revenues increased 3.4% year over year to $91 million. Gross profit inched up 1.5% to $32.9 million from $32.4 million in the prior-year quarter. However, gross margin contracted 40 basis points (bps) to 26.5%. Higher margins in the infrastructure segment were more than offset by lower margin in the irrigation segment. Increased cost absorption in Road Zipper system production and volume leverage from road safety product sales led to improvement in infrastructure margins.

Operating expenses remained flat year over year at $24 million in the quarter, excluding the environmental remediation expenses in the prior year quarter. The company posted an operating profit of $8.5 million, a 4.9% increase from an adjusted $8.1 million in the year-ago quarter. Operating margin came in at 6.9%, unchanged from the prior-year quarter, excluding the environmental expenses. Lindsay's backlog as of Feb 28, 2017, was $62.3 million compared with $52.6 million as of Feb 29, 2016.

Financial Position

Lindsay had cash and cash equivalents of $102.8 million at the end of second-quarter fiscal 2017 compared with $89.5 million at the end of second-quarter fiscal 2016. The company reported cash flow from operating activities of $10.7 million for the six-month period ended Feb 28, 2017 compared with $5 million in the prior-year period. Lindsay had long-term debt of $117 million at the end of the fiscal second quarter, flat year over year.

There were no share repurchases during the fiscal second quarter. As of Feb 28, 2017, shares worth around $63.7 million remained under the company's buyback program.

Outlook

Lindsay is poised to gain from improving activity levels in the international irrigation and infrastructure markets. Further, population growth, increased food production, efficient water use and infrastructure upgrades are likely to drive long-term growth.

Lindsay Corporation's results continue to bear the brunt of lower commodity prices. Also, reduced farm income continues to affect farmer sentiment regarding capital goods purchases. Additionally, Lindsay is likely to witness escalated costs and near-term volatility in the road safety product revenues.

Lindsay currently carries a Zacks Rank #3 (Hold).

Year to date, the Lindsay stock has outperformed the Zacks categorized Machinery-Farm industry. Lindsay's stock has gained 17.6%, while the Zacks sub industry recorded growth of 4.7% over the same time frame.

Stocks to Consider

Better-ranked stocks in the sector include ACCO Brands Corporation ACCO , Deere & Company DE and John Bean Technologies Corporation JBT . All of the three stocks boast a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

ACCO Brands has an earnings ESP of 24.74% for the trailing four quarters. Deere has an average earnings surprise of 60.50% for the last four quarters, while John Bean Technologies generated an average earnings surprise of 21.01% in the past four quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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