Shares of Lindsay Corporation LNN gained around 9% to close at $74.94 yesterday after the company posted better-than-expected first-quarter fiscal 2016 earnings (ended Nov 30, 2015). The company reported earnings of 62 cents per share, flat with the year-ago quarter. Earnings, however, topped the Zacks Consensus Estimate of 56 cents with a positive earnings surprise of 10.7%.
The irrigation equipment manufacturer reported revenues of $121.6 million, which fell short of the Zacks Consensus Estimate of $130.4 million. Revenues decreased around 9.8% from $134.8 million in the prior-year quarter.
Total irrigation equipment revenues declined 12% year over year to $101.3 million. U.S. irrigation revenues dropped 6% year over year to $59.2 million due to a decrease in units sold, which was partly offset by sales in Elecsys Corporation.
International irrigation revenues plummeted 19% to $42 million due to unfavorable currency impact and lower sales in Brazil and specific export markets. On the other hand, infrastructure revenues edged up 1% to $20.3 million due to a rise in sales of road safety and Road Zipper products.
Operational Update
Cost of operating revenues decreased 10.9% year over year to $87.2 million. Gross profit declined 6.8% to $34.4 million from $36.9 million in the year-ago quarter. Gross margin expanded 90 basis points (bps) to 28.3%. Both irrigation and infrastructure margins increased roughly 1%.
Operating expenses were down 9.4% year over year to $22.7 million in the quarter. Operating income declined 1.3% year over year to $11.7 million. Operating margin improved 90 bps to 9.7% from 8.8% in the prior-year quarter.
Lindsay’s backlog as of Nov 30, 2015 was $61.9 million compared with $68.3 million as of Nov 30, 2014 and $48 million as of Aug 31, 2015. The backlog as of Nov 30, 2015 included $8.1 million for Elecsys Corporation. Notably, the prior-year backlog included $12.7 million related to the Golden Gate Bridge project.
Financial Position
Lindsay had cash and cash equivalents of $129.3 million at the end of the first quarter of fiscal 2016 compared with $139.3 million in the prior-year period. Cash flow from operations came in at $8.5 million in the reported quarter as against $5.7 million in the year-ago quarter. Lindsay had long-term debt of $117 million at the end of the quarter compared with none last year.
During the fiscal first quarter, Lindsay repurchased 136,263 shares for $9.2 million. As of Nov 30, 2015, shares worth around $102.8 million remained under the company’s buyback program.
Outlook
Long-term trends remain positive for Lindsay as the need for increased agricultural production for the growing population will continue to drive irrigation equipment demand. Lindsay continues to execute its capital allocation plan, including additional stock repurchases. The company will also benefit from infrastructure upgrades and geographic expansion.
However, Lindsay’s performance will likely be hurt by lower commodity prices. Further, foreign exchange rates continue to negatively affect international sales. The company does not expect to have visibility into the primary selling season until February or March. Moreover, the market environment is expected to remain challenging at least through 2016, which may affect Lindsay’s performance in the next year.
Lindsay currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the sector include Astec Industries, Inc. ASTE, John Bean Technologies Corporation JBT and Franklin Electric Co., Inc. FELE. All of these stocks hold a Zacks Rank #2 (Buy).
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