Lindsay Tops Estimates - Analyst Blog

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Lindsay Corporation 's ( LNN ) adjusted EPS of 60 cents per share for the fiscal first quarter 2012 outperformed the Zacks Consensus Estimate of 46 cents. Results improved 58% from the prior-year quarter's earnings of 38 cents per share.

Including 37 cents per share of accrued expense related to an estimated increase in the company's liability for environmental remediation at its Lindsay, Nebraska facility, EPS in the quarter was 23 cents. Including a similar expense in the prior-year quarter, EPS stood at 34 cents.

Operational Update

Total revenue in the quarter increased 34% year over year to $119 million, beating the Zacks Consensus Estimate of $102 million. The improvement stemmed from a 68% rise in total irrigation equipment revenues, in turn driven by a 66% increase in domestic irrigation revenues and a 71% increase in international irrigation revenues.

However, a 37% year-over-year decline in infrastructure revenues due to lower sales of Quick-Change Moveable Barrier (QMB) product was a drag. Excluding QMB system sales, infrastructure revenues increased 7%.

Cost of goods sold in the quarter increased 37% to $88.9 million. Gross profit rose 25% to $30.2 million whereas gross margin contracted 180 basis points year over year to 25.4% largely attributable to lower revenues from the higher-margin QMB product.

Operating expenses increased to $25.2 million in the quarter from $17.6 million in the year-earlier quarter. Adjusted operating income in the quarter amounted to $17.9 million, up 6.2% year over year. Operating margin was 10.3%, up 210 basis points year over year.

Lindsay's backlog at quarter end was $52.8 million compared with $59.7 million at the end of the year-ago quarter and $46.0 million at fiscal 2011 end.

Financial Position

Lindsay ended the first quarter of fiscal 2012 with cash and cash equivalent of $108.7 million, up from $107.2 million at fiscal 2011 end. Long-term debt declined to $3.2 million from $4.3 million as of fiscal 2011 end. The company generated $6.2 million of net cash from operating activity in the quarter, up from $2.2 million in the year-ago quarter.


Lindsay is optimistic about positive farmer sentiment. Moreover, the company's long-term drivers including expanded food production, water use efficiency and transportation safety products, and population growth are expected to hold course. 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.

Our Take

According to the United States Department of Agriculture, record-high prices for crops and livestock will lift U.S. farm income by 19% in 2011, which for the first time will top $100 billion. Another buoyant year is also in sight in 2012 for an agricultural boom that started in 2006 is coming to fruition. Lindsay's irrigation segment will thus benefit from rising farm income. The irrigation segment also stands to benefit from a continuing shift from flood irrigation to more efficient systems and exposure to fast-growing international irrigation markets.

Lindsay's Infrastructure revenues depend on government funding of transportation projects. The segment has been experiencing pressure from budget cutbacks. Thus, the outlook for the infrastructure segment remains unclear due to government budget constraints and a delay in the congressional passage of a new federal highway bill.

We retain our Neutral long-term recommendation on Lindsay. 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. ( VMI ).

LINDSAY CORP ( LNN ): Free Stock Analysis Report

VALMONT INDS ( VMI ): Free Stock Analysis Report

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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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