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Lindsay (LNN) Q4 Earnings & Sales Miss Estimates, Down Y/Y

Zacks

Lindsay Corporation LNN reported fourth-quarter fiscal 2017 (ended Aug 31, 2017) earnings of 59 cents per share compared with 73 cents per share recorded in the prior-year quarter. The reported quarter’s earnings were hurt by a higher effective income tax. Also, earnings missed the Zacks Consensus Estimate of 65 cents.

The irrigation equipment manufacturer reported revenues of $132 million, missing the Zacks Consensus Estimate of $135 million. In addition, revenues edged down 0.8% on a year-over-year basis.

Irrigation segment revenues were up 2% year over year to $101.9 million. International irrigation revenues recorded growth of 9% compared to the year-ago quarter, driven by the continued market recovery in Brazil, increased project activity in developing markets and a slightly favorable currency translation impact. Moreover, domestic irrigation revenues decreased 3% due to lower filtration and pump system revenues.

Lindsay Corporation Price and Consensus

Lindsay Corporation Price and Consensus | Lindsay Corporation Quote


Infrastructure segment revenues dropped 9% year over year to $30 million due to lower Road Zipper system project sales as well as U.S. road safety products sales.

Operational Update

Cost of operating revenues inched up 1.3% year over year to $94.1 million. Gross profit went down 5.4% to $37.8 million from $39.9 million in the year-earlier quarter. Gross margin also contracted 150 basis points (bps) to 28.6%. Irrigation margins were impacted by a higher mix of revenues from international markets, where gross margins are typically lower. Infrastructure margins were lower year over year.

Operating expenses declined 6.1% year over year to $26.3 million in the quarter. The downside stemmed from lower selling and administrative expenses, while engineering and development costs remained stable. The company posted an operating profit of $11.5 million, a 4% drop from $12 million recorded in the comparable period last year. Operating margin descended 30 bps to 8.7% in the fiscal fourth quarter compared to the prior-year quarter.

Financial Position

Lindsay had cash and cash equivalents of $121.6 million at the end of the fiscal fourth quarter compared with $101.2 million at the end of fourth-quarter fiscal 2016. The company reported cash flow from operating activities of $39.4 million at the end of fiscal 2017 compared with $33 million recorded in the year-ago period. Lindsay had long-term debt of $116.8 million at the end of the fiscal fourth quarter, flat year over year.

There were no share repurchases during the fiscal fourth quarter. As of Aug 31, 2017, shares worth around $63.7 million remained under the company’s buyback program.

Lindsay’s backlog as of Aug 31, 2017, was $51.8 million compared with $50.7 million as of Aug 31, 2016.

Lindsay’s board of directors has announced a quarterly cash dividend of 30 cents per share, payable on Nov 30, to shareholders of record on Nov 16, 2017.

Fiscal 2017 Performance

Lindsay’s earnings increased 17.3% year over year to $2.17 per share in fiscal 2017. Earnings, however, lagged the Zacks Consensus Estimate of $2.26. Revenues for the full year climbed marginally to $518 million from $516.4 million in fiscal 2016. Nevertheless, the top line missed the Zacks Consensus Estimate of $521 million.

Outlook

Lindsay expects that stabilization in the U.S. irrigation equipment market, continuous recovery in Brazil and increased project activity in developing international markets will drive growth in international irrigation.

Notably, farmers’ sentiments in the United States have been displaying signs of improvement, of late. Lindsay projects modest growth in the U.S. irrigation business and continued growth in international irrigation markets in future. Additionally, population growth, expanded food production and efficient water use remain long-term drivers.

Over the past year, Lindsay’s stock has underperformed the industry to which it belongs. While this Zacks Rank #3 (Hold) company has gained 12.7%, the industry recorded growth of 45.1% during the same time frame.


Better-ranked stocks in the same space include Nine Dragons Paper (Holdings) Limited NDGPY, Komatsu Ltd. KMTUY and China National Materials Company Limited CASDY. All three stocks flaunt a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nine Dragons Paper has an expected long-term earnings growth rate of 18%.

Komatsu has an expected long-term earnings growth rate of 12.7%.

China National Materials has an expected long-term earnings growth rate of 20%.

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