Strong 1Q Results at Lindsay (AGCO) (DE) (LNN)

Lindsay Corporation’s (LNN) earnings per share increased an impressive 92% to $1.15 in the first quarter of fiscal 2013 from an adjusted earnings of 60 cents a share in the year-ago quarter. Results were way ahead of the Zacks Consensus Estimate of 75 cents per share.

Earnings per share in the prior-year quarter stood at 23 cents, including an after tax effect of 37 cents of accrued expenses related to environmental remediation at the company's Lindsay, Nebraska manufacturing facility. Compared to this, EPS of $1.15 in the quarter grew a whopping 400%

Operational Update

Total revenue improved 24% year over year to $147.4 million, beating the Zacks Consensus Estimate of $130 million. The year-over-year increase in revenues stemmed from a 33% improvement in total irrigation equipment revenues. Domestic irrigation revenues rose 59% but was offset by a 6% decline in international irrigation revenues due to lower project revenues in the Middle East. On the other hand, infrastructure revenues fell 29% during the quarter.

Cost of goods sold increased 17% to $104 million. Gross profit improved 42% to $42.9 million with gross margin expanding 370 basis points to 29.1%. Irrigation margins improved 4% helped by lower input costs, strong pricing environment and fixed cost leverage on higher sales. On the other hand, infrastructure margins declined 4% due to sales mix and deleverage of fixed costs from lower sales.

Operating expenses improved 18% to $20.6 million in the quarter. Operating income in the quarter soared 338% to $22.3 million. Operating margin in the quarter was 15.1% compared with 4.3% in the prior year quarter.

Lindsay’s backlog at the end of first quarter fiscal 2013 was $85.1 million compared with $52.8 million at the end of first quarter fiscal 2012 and $57.1 million at the end of fourth quarter fiscal 2012.

Financial Position

Cash and cash equivalents of $152.2 million were $143.4 million as of November 30, 2012 and $108.7 compared with $108.7 million as of November 30, 2011. The company generated $13.4 million in net cash from operating activity in the quarter compared with $6.2 million in the year-ago quarter.

Total debt was $3.2 million as of November 30, 2012, compared to $7.5 million as of November 30, 2011. Debt-to-capitalization ratio improved to 1% as of November 30, 2012, from 2.7% as November 30, 2011.

Outlook

Lindsay expects that positive farmer sentiment, farm incomes and commodity prices affected by dry weather prevailing in the U.S. will positively impact the company in fiscal 2013. Lindsay expects long-term demand to remain high, driven by increased food production and efficient water use. Even though infrastructure sales declined during the quarter, it is expected to pick up through the remainder of the year.

Our View

Demand for Lindsay’s products will increase, driven by soaring demand for food production owing to worldwide population growth, efficient water use, mounting need for biofuel and improving transportation infrastructure. Moreover, the new highway bill will increase government spending on infrastructure favoring Lindsay in the space.

Lindsay Corporation is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems, which are used principally for agriculture to increase or stabilize crop production while conserving water, energy, and labor. Lindsay retains a Zacks Rank #3 (Hold). AGCO Corporation (AGCO) and Deere & Company (DE) both retain a Zacks Rank #3 (Hold) in the same industry.