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On Sep 13, we reiterated our Neutral recommendation on Lindsay Corporation (LNN - Analyst Report), a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems.

Why Reiterated?

International demand for irrigation systems remains positive. Demand in Brazil and Middle East particularly remains strong. In Brazil, demand for irrigation equipment is fueled by a lower interest rate provided by the government to spur the agriculture industry. Furthermore, in some international markets, adoption of center pivot systems remains in nascent stages and the demand for more efficient water use in agriculture is on the rise. Being one of the market leaders, Lindsay Corporation is well positioned to capitalize on the demand.

Construction in the U.S. is finally stabilizing. The American Institute of Architects projects a 5% increase in spending in 2013 for non-residential construction projects and 7.2% for 2014. This bodes well for Lindsay’s infrastructure business going ahead.

Particularly, bid activity for Quickchange Moveable Barrier (QMB) projects has picked up over the last several months. Management expects some improvement in QMB revenues in the fourth quarter of fiscal 2013, and expects some new orders in fiscal 2014. Total backlog increased a robust 80% year over year to $80 million, suggesting a solid finish to fiscal 2013.

On the flipside, Lindsay has achieved record results for the first three quarters of fiscal 2013, driven by positive farmer sentiment toward capital investments and concern over the past and potential drought conditions. As domestic demand normalizes along with lower expectations for commodity prices, it will be difficult for Lindsay to deliver similar year-over-year growth in the future. Furthermore, Lindsay expects gross margin headwinds in the fourth quarter due to lower-margin international irrigation project backlog planned manufacturing maintenance projects.

Other Stocks to Consider

Other players that are worth a mention in the industry are Alamo Group, Inc. (ALG - Snapshot Report) and Kubota Corporation (KUBTY), both carrying a Zacks Rank #1 (Strong Buy), while  AGCO Corporation (AGCO - Analyst Report) retains a Zacks Rank #2 (Strong Buy).
 

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