Lindsay (LNN) Q3 Earnings Beat on Infrastructure Strength

Lindsay Corporation LNN delivered third-quarter fiscal 2018 (ended May 31, 2018) adjusted earnings of $1.66 per share, surpassing the Zacks Consensus Estimate of $1.39. Including the Foundation for Growth initiative, earnings in the quarter came in at 96 cents, down 6% from $1.02 reported in the year-ago quarter.

The irrigation equipment manufacturer reported revenues of $170 million, up 12% year over year. Revenues surpassed the Zacks Consensus Estimate of $166 million.

Irrigation segment revenues climbed 7% year over year to $128 million. Domestic irrigation revenues recorded growth of 11% from the year-ago quarter, driven by an increase in irrigation system sales volume and higher average selling prices. However, international irrigation revenues declined slightly from the prior-year quarter.

Infrastructure segment revenues were surged 31% year over year to $41 million due to the delivery of significant portion of two large Road Zipper System orders that were in the backlog.

Operating expenses flared up 15% year over year to $24.9 million in the reported quarter. The company reported an operating profit of $18.7 million, up 7% from the comparable period last year.

The Irrigation segment’s operating income plunged 29% to $11.7 million in the quarter. Operating income in the infrastructure segment however soared 78% year over year to $14.2 million.

Lindsay had cash and cash equivalents of $112 million at the end of the fiscal third-quarter compared with $113 million recorded at the end of the comparable quarter last fiscal. The company recorded cash flow of $8 million from operating activities for the nine-month period ended May 31, 2018, compared with $24.5 million in the prior-year period. Lindsay had long-term debt of $117 million at the end of the reported quarter, flat from the end of the prior-year quarter.

Lindsay’s backlog as of May 31, 2018, was $56 million compared with $70 million as of May 31, 2017. A higher backlog in the infrastructure segment was offset by a lower backlog in the irrigation segment.

Lindsay’s growth objectives include setting strategic direction, defining priorities and improving overall operating performance. A key financial objective is to achieve operating margin performance between 11% and 12% in fiscal 2020. The company expects to incur additional costs regarding this initiative over each of the next several quarters. These additional costs are anticipated to be recovered through improved operating income in fiscal 2020.

During the third quarter, Lindsay announced its plan to divest pump and filtration businesses as well as a company-owned irrigation dealership. The combined revenues from these businesses are approximately $70 million annually. The divestures are expected to reduce future revenues and consequently impacting the operating margins positively. Further, the company announced plans to close one of its Infrastructure manufacturing facilities prior to the end of the calendar year.

Lindsay’s Infrastructure business is poised to gain from a growing backlog of Road Zipper projects. The company will remain focused on providing innovative technology solutions and improving operating performance. However, the North American agricultural market conditions are expected to remain challenged due to lower commodity prices and farm income. The company is implementing price increases to counter the impact of the recently-announced tariffs on steel and aluminum product imports.

In the past three months, shares of Lindsay have gained around 7%, against the industry’s decline of 10%.

Lindsay currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the sector include Actuant Corporation ATU, DMC Global Inc. BOOM and Terex Corporation TEX. All of these stocks carry sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Actuant has expected long-term growth rate of 15.6%. Its shares have gained 25% over the past three months.

DMC Global has expected long-term growth rate of 20%. Its shares have appreciated 71% over the past three months.

Terex has expected long-term growth rate of 21%. Its shares have appreciated 11% in the past three months.

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