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On Nov 15, we downgraded our recommendation on Lindsay Corporation (LNN - Analyst Report) from Neutral to Underperform. This leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems suffered a downgrade due to lower assumptions for the domestic irrigation business, which in turn was due to crop price declines and difficult comparisons (driven by high crop prices and drought conditions last year) and a narrowed infrastructure outlook.

Why Downgraded?

Lindsay Corporation’s earnings per share increased 19% year on year to 81 cents in the fourth quarter of fiscal 2013. Total revenue improved 16% year over year to $148 million. Domestic irrigation revenues declined 4%, while international irrigation revenues improved 44% driven by a robust demand in international markets.

Domestic irrigation sales in 2014 are likely to be affected by declining crop prices and tough comparisons. Sales were particularly strong in 2013 due to drought-like conditions across the U.S. and Corn Belt, which led to a hike in crop prices. Lower commodity prices are negatively impacting farmer sentiment and management noted that U.S. irrigation orders have slowed from the drought-driven pace of a year ago.

USDA projected net farm income to be approximately $120.6 billion for CY2013. This will be the highest on record and 63% above the 10-year average. However, farmer sentiment regarding capital goods purchases is becoming more conservative due to lower commodity prices and the expected expiration of the Section 179 tax deduction in 2013, offset by their strong balance sheets and high farm income.

Even though infrastructure revenues edged up 2% during the quarter, demand in the infrastructure segment remains limited due to constricted government infrastructure spending and project delays. Lindsay does not foresee a major turnaround in government infrastructure spending in fiscal 2014.

In September, the Golden Gate Bridge Highway and Transportation District announced the approval of the procurement of a $14.1 million movable barrier from Lindsay, for the Golden Gate bridge. The company anticipates that the Golden Gate Moveable Barrier Project will be postponed to fiscal 2015.

Other Stocks to Consider

Stocks in the industrial products sector with a favorable Zacks Rank are Xylem Inc. (XYL - Analyst Report) with a Zacks Rank  #1, and Alamo Group, Inc. (ALG - Snapshot Report) and H&E Equipment Services Inc. (HEES - Snapshot Report) with a Zacks Rank #2 (Buy).

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