Lindsay Corporation LNN is set to report fourth-quarter and fiscal 2015 results on Oct 15. Last quarter, the company posted an earnings surprise of 44.74%. Over the last 4 quarters, the company has managed to beat the Zacks Consensus Estimate on 2 occasions, while falling short in the other two, ending up with an average positive earnings surprise of 14.90%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Lindsay’s results continue to be affected by low U.S. demand because of lower commodity prices and farm incomes along with competitive pricing pressure. Slump in international irrigation revenues also continues to be a deterrent.
Lindsay has not provided any guidance for fiscal 2015 but remains concerned about the strengthening U.S. dollar which could affect sales in some markets. Further, the company anticipates a reduction in export demand while ethanol production is likely to remain under pressure. Uncertainty about highway funding has made customers cautious about major equipment purchases, which will affect Lindsay’s performance.
Lindsay’s order backlog decreased 27.7% to $53.2 million as of May 31, 2015 compared with $53.2 million as of May 31, 2014. Year-over-year decrease in irrigation backlog levels reflects reduced demand from storm damage. Lindsay’s backlog represents some long-term irrigation and infrastructure projects as well as short lead time orders. The company’s backlog can fluctuate from time to time due to the seasonality, cyclicality, timing and execution of contracts.
The pricing environment both in the U.S. and international markets is expected to remain competitive in the near-term. Further, Lindsay began manufacturing operations at its facility in Turkey in the beginning of Mar 2015. Although the new facility will provide opportunities for sales growth, the start-up will likely have negative impact on margins.
Earnings Whispers
Our proven model does not conclusively show that Lindsay will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Lindsay’s Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are at 56 cents.
Zacks Rank: Lindsay’s Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Sharps Compliance Corp. SMED, with an Earnings ESP of +25.00% has a Zacks Rank #1.
Allegion plc Ordinary Shares ALLE, with an Earnings ESP of +2.60% carries a Zacks Rank #3.
MRC Global Inc. MRC, with an Earnings ESP of +66.67% holds a Zacks Rank #3.
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