Lindsay Surpasses Estimates – Analyst Blog

Lindsay Corporation (LNN) delivered a net income of $6.2 million, or 50 cents per share in its third quarter, ended May 31, 2010, up from $5.3 million or 42 cents per share in the year-ago period. The company exceeded the Zacks Consensus Estimate of 41 cents per share.

 

Factors like improved international as well as domestic irrigation sales and higher road safety product sales, driven by stimulus funded projects, led to the increase.

 

Total revenue in the quarter was $100.1 million, up 18% from $84.6 million in the year-ago period. Total irrigation equipment revenues increased 21% year over year to $80.4 million. Strong performance in Australia, Mexico, Brazil and South Africa led to international irrigation revenues increasing 29%. Domestic irrigation revenues increased 17%. Infrastructure revenues upped 8% year over year to $19.7 million.

 

Expenses increased year over year on an absolute basis, with cost of operating revenues up 17.8% and total operating expenses increasing 12.4%. Increases in incentive compensation and research and development expenses mainly drove the increase in operating expenses.

 

However, when expressed as a percentage of revenues, cost of operating revenues decreased 33 basis points and total operating expenses declined 80 basis points in the quarter compared with the prior-year quarter.

 

Consequently, gross margin expanded 33 basis points year over year to 25.2% and operating margin climbed 113 basis points to 10% compared with the year-ago period.

 

The company noted increased irrigation margins from improved factory efficiencies at its Lindsay, Nebraska facility and favorable regional sales mix compared with the previous year quarter. Infrastructure margins were hurt due to decreased revenues of higher-margin moveable barrier product.

 

 

As of May 31, 2010, Lindsay’s backlog was $33.9 million compared with $33.6 million as of February 28, 2010 and $40.2 million as of May 31, 2009.

 

 

Lindsay had cash and cash equivalents of $83.5 million as of May 31, 2010, down from $91.6 million as of February 28, 2010.

 

The company generated $3.7 million net cash from operating activities in the third quarter compared with $26.3 million in the year-ago period.

 

Total debt decreased to $9.6 million as of May 31, 2010 from $16.4 million as of February 28, 2010. During the third quarter, the company repaid a $7.1 million term note. Debt-to-capitalization ratio at the end of the quarter was 6% compared with 9% as of February 28, 2010.

 

Total shareholders’ equity was $223.3 million May 31, 2010 compared with $220 million as of February 28, 2010.

 

 

Lindsay contends that farmer sentiment worldwide has improved over the last year, though the peak selling period for irrigation equipment has now ended for 2010. The company believes even though stimulus spending has been instrumental in increased sales and quote activity for its infrastructure segment, a multi-year highway bill is essential for sustainable growth in the U.S.

 

 

Lindsay stands to benefit, in the long term, from the demand for increased food production, driven by worldwide population growth, efficient water use, the growing need for biofuel and improvements in transportation infrastructure. However, lower expected farm income and uncertainty surrounding reauthorization of the federal highway bill are adversely impacting the company’s incoming order rate. We maintain a Neutral rating on the stock.

 

Omaha, Nebraska-based Lindsay Corporation is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems, which are used principally in the agricultural industry to increase or stabilize crop production while conserving water, energy and labor. The company also manufactures and markets infrastructure and road safety products.