Shares of Lindsay Corporation LNN surged around 9% to close at $89.70 yesterday after the company reported better-than-expected third-quarter fiscal 2015 (ended May 31, 2015) results. Earnings of $1.10 per share surpassed the Zacks Consensus Estimate of 76 cents by a wide margin of around 45% but declined about 14% year over year.
The manufacturer of irrigation equipment reported revenues of $160.7 million, which outpaced the Zacks Consensus Estimate of $152 million. Revenues, however, decreased around 5.4% from $169.9 million in the prior-year quarter, mainly due to the slump in International irrigation revenues.
Unfavorable currency exchange hurt International irrigation sales while U.S. irrigation sales inched down 2%, primarily due to a reduction in commodity prices and lower storm damage sales. These were partly offset by rise in Infrastructure sales.
Operational Update
Cost of operating revenues decreased 6% year over year to $114 million. Gross profit declined 3.9% to $46.4 million from $48.2 million in the year-ago quarter, while gross margin expanded 50 basis points (bps) to 28.9%. A more competitive pricing environment and costs deleverage from lower sales had a negative impact on margins. Irrigation margin decreased by around 1 percentage point, whereas Infrastructure margin increased roughly 10 percentage points.
Operating expenses went up 8% year over year to $24.9 million in the quarter. Operating income decreased 14.8% year over year to $21.5 million. Operating margin also decreased to 13.4% from 14.8% in the prior-year quarter.
Lindsay Corp.’s backlog was $53.2 million as of May 31, 2015, compared with $73.6 million as of May 31, 2014. The current period includes $12.3 million of backlog from Elecsys Corporation.
Financial Position
Cash and cash equivalents were at $154 million at the end of third-quarter fiscal 2015 versus $182 million at year-ago quarter end. The company recorded cash from operations of $35.4 million for the nine-month period ended May 31, 2015, compared to $65.9 million in the year-ago period. Lindsay Corp. had long-term debt of $117.2 million at the end of the quarter, while the prior-year period recorded no debt.
Guidance
Lindsay Corp. has not provided any guidance for fiscal 2015. The company remains optimistic about productivity improvement and geographic expansion. The company will benefit from balance sheet strength and additional growth through acquisitions. Lindsay Corp.’s continuous focus on developing its cost structure and investing in product development and expansion of global sales capabilities will also drive growth.
However, the U.S. irrigation market continues to be impacted by lower commodity prices and farm incomes. Moreover, changing currency rates and uncertainty of long-term U.S. highway bill remain headwinds for the company.
Omaha, NE-based Lindsay Corp. is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems, which are primarily used for agricultural purposes to increase or stabilize crop production, while saving water, energy and labor at the same time.
Lindsay Corp. carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the sector include AGCO Corporation AGCO, Kubota Corporation KUBTY and Allegion plc Ordinary Shares ALLE. All these stocks carry a Zacks Rank #2 (Buy).
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