Bull of the Day: Lindsay Corporation (LNN)

Lindsay Corporation ( LNN - Analyst Report ) delivered a big fiscal first quarter earnings beat on January 8. The company, which provides irrigation systems and infrastructure products, experienced strong top-line growth and saw profit margin expansion in the quarter, leading to a 400% increase in earnings per share.

Earnings estimates jumped significantly higher after the beat, sending the stock to a Zacks Rank of 1 (Strong Buy).

Company Description

Lindsay Corporation manufactures irrigation equipment primarily used in agricultural markets. The company also manufactures infrastructure and road safety products through its wholly owned subsidiaries, Barrier Systems Inc. and Snoline S.P.A.

Linsday Corporation was founded in 1954 and has a market cap of $1.2 billion.

First Quarter Results

On January 8, Lindsay Corporation reported results for the first quarter of its fiscal 2013. Earnings per share came in a $1.15, crushing the Zacks Consensus Estimate of $0.75. Revenue soared 24% to $147 million, well ahead of the consensus of $130 million. This was primarily driven by a 33% increase in irrigation equipment revenues. Domestic irrigation revenues were particularly strong with a 59% increase over the same quarter last year.

The gross profit margin expanded from 25.4% to 29.1% as due to lower input costs, a strong pricing environment and the leveraging of fixed costs. The operating profit margin expanded from 4.3% to a whopping 15.1%.

And the backlog of unshipped orders was strong too as drought conditions combined with positive farmer sentiment, farm incomes and commodity prices continued into fiscal 2013. As of November 30, 2012, the company recorded a backlog of $85.1 million compared with $52.8 million on the same date last year.

Estimates Soaring

Given the huge Q1 beat and strong backlog, analysts revised their estimates significantly higher for both 2013 and 2014. This sent shares to a Zacks Rank of 1 (Strong Buy).

The 2013 Zacks Consensus Estimate increased from $4.12 before the report to $4.86 after it. And the 2014 consensus jumped from $4.40 to $5.01.

Valuation

The valuation picture looks reasonable for LNN. Shares trade at 19x forward earnings, which is a premium to the industry group but a discount to its 10-year median forward multiple of 22x. The company also boasts a debt-free balance sheet and strong returns on invested capital.

The Bottom Line

With a strong earnings and revenue beat, rising estimates and reasonable valuation, Lindsay Corporation offers a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.