Shares of Lindsay Corporation LNN have gained 9% since the company’s President and Chief Executive Officer, Rick Parod, stated on the first-quarter fiscal 2016 conference call that the recent passage of the five-year Highway Bill is a significant step and would improve the outlook of the Infrastructure business. He added that the company will continue to vigorously expand market share, and product and service offerings while investing in productivity enhancements and cutting costs.
This leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems reported earnings of 62 cents per share in the fiscal first quarter, flat with the year-ago quarter. Revenues of $121.6 million reflected a decline of around 9.8% from the prior-year quarter. The 1% rise in infrastructure revenues, driven by a rise in sales of road safety and Road Zipper products, was more than offset by a 12% drop in irrigation revenues.
In the US Irrigation market, revenues declined 6% as lower commodity prices and reduced farm income continued to affect farmer sentiment regarding capital goods purchases. Parod however pointed out that despite the US Department of Agriculture’s projection of a 38% year-over-year decline in net farm income to $55.9 billion, the lowest since 2002, grain prices have been more stable over the last 12 months while input costs such as fertilizers and chemicals have begun to decline. While there has not been a positive upturn in overall market conditions for agricultural equipment sales, Parod stated that these factors are indications that the bottom of the agricultural commodity cycle in the US is near.
International irrigation revenues declined 19% year over year due to fluctuations in foreign currency exchange rates and a drastic slowdown in sales in Brazil accompanied with more modest declines in a few export markets. Even though there is significant project quoting activity in the international markets, Parod apprehends unfavorable currency rates and lower grain prices may lead to delays in projects in fiscal 2016.
On the other hand, the momentum in Infrastructure remains strong driven by increased interest in the Road Zipper system. The recent passage of the five-year Highway Bill bodes well for sales growth for road safety products and Road Zipper systems in the next two years and beyond, as it provides states with more funding, visibility and certainty regarding planned projects.
The company meanwhile will strive to gain market share in both Irrigation and Infrastructure while continuing to expand competitive advantages through its diverse offering of products and services. Lindsay Corporation will also continue to invest in productivity enhancements besides improving its cost structure. The company continues to invest in organic growth initiatives, pay dividends, repurchase shares and pursue synergistic water-related acquisitions that offer attractive returns to its shareholders.
Lindsay currently carries a Zacks Rank #3 (Hold). 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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