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Why Is Lindsay (LNN) Down 3.1% Since its Last Earnings Report?
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It has been about a month since the last earnings report for Lindsay Corporation (LNN - Free Report) . Shares have lost about 3.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is LNN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lindsay's Q2 Earnings in Line, Revenues Miss Estimates
Lindsay reported second-quarter fiscal 2018 (ended Feb 28, 2018) adjusted earnings of 56 cents per share, which surged 19% from 47 cents per share recorded in the prior-year quarter. Earnings came in line with the Zacks Consensus Estimate.
The irrigation equipment manufacturer reported revenues of $130 million, up 5% year over year. However, revenues missed the Zacks Consensus Estimate of $132 million.
Irrigation segment revenues climbed 5% year over year to $112 million. Domestic irrigation revenues recorded growth of 23% from the year-ago quarter, driven by an increase in irrigation system sales volume. However, international irrigation revenues dipped 22% due to lower project sales and stable demand in core markets.
Infrastructure segment revenues were up 3% year over year to $18.5 million led by elevated Road Zipper System revenues, partly offset by lower revenues in the North American road safety products.
Operational Update
Cost of operating revenues went up 4% year over year to $95 million. Gross profit improved 7% to $35.3 million from $33 million reported in the year-earlier quarter. Gross margin also expanded 60 basis points (bps) to 27%.
Operating expenses flared up 15.7% year over year to $28.3 million in the reported quarter. The company posted an operating profit of $7.1 million, down from $8.5 million recorded in the comparable period last year. Operating margin shrunk 150 bps to 5.4% in the fiscal second quarter compared to the prior-year quarter.
Financial Position
Lindsay had cash and cash equivalents of $102.2 million at the end of the fiscal second quarter compared with $102.8 million recorded at the end of the comparable quarter last fiscal. The company recorded cash usage of $9 million from operating activities for the six-month period ended Feb 28, 2018, compared with positive cash flow of $10.7 million recorded in the comparable prior-year period. Lindsay had long-term debt of $116.7 million at the end of the reported quarter compared with $116.9 million recorded at the end of the prior-year quarter.
Lindsay’s backlog as of Feb 28, 2018, was $90.2 million compared with $62.3 million as of Feb 28, 2017.
Growth Initiatives
Lindsay’s growth objectives include setting strategic direction, defining priorities and improving overall operating performance. A key financial objective is to achieve operating margin performance between 11% and 12% in fiscal 2020. The company expects to incur additional costs regarding this initiative over each of the next several quarters. These additional costs are anticipated to be recovered through improved operating income in fiscal 2020.
Outlook
Lindsay’s Infrastructure business is poised to gain from a growing backlog of Road Zipper projects. The company noted that it will remain focused on providing innovative technology solutions and improving operating performance. However, the North American agricultural market conditions are expected to remain challenged due to lower commodity prices and farm income. Further, the recently-announced tariffs on steel and aluminum product imports are a concern due to the potential impact on raw-material cost and possible trade retaliation that might affect U.S. agricultural products.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
At this time, LNN has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, LNN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Lindsay (LNN) Down 3.1% Since its Last Earnings Report?
It has been about a month since the last earnings report for Lindsay Corporation (LNN - Free Report) . Shares have lost about 3.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is LNN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lindsay's Q2 Earnings in Line, Revenues Miss Estimates
Lindsay reported second-quarter fiscal 2018 (ended Feb 28, 2018) adjusted earnings of 56 cents per share, which surged 19% from 47 cents per share recorded in the prior-year quarter. Earnings came in line with the Zacks Consensus Estimate.
The irrigation equipment manufacturer reported revenues of $130 million, up 5% year over year. However, revenues missed the Zacks Consensus Estimate of $132 million.
Irrigation segment revenues climbed 5% year over year to $112 million. Domestic irrigation revenues recorded growth of 23% from the year-ago quarter, driven by an increase in irrigation system sales volume. However, international irrigation revenues dipped 22% due to lower project sales and stable demand in core markets.
Infrastructure segment revenues were up 3% year over year to $18.5 million led by elevated Road Zipper System revenues, partly offset by lower revenues in the North American road safety products.
Operational Update
Cost of operating revenues went up 4% year over year to $95 million. Gross profit improved 7% to $35.3 million from $33 million reported in the year-earlier quarter. Gross margin also expanded 60 basis points (bps) to 27%.
Operating expenses flared up 15.7% year over year to $28.3 million in the reported quarter. The company posted an operating profit of $7.1 million, down from $8.5 million recorded in the comparable period last year. Operating margin shrunk 150 bps to 5.4% in the fiscal second quarter compared to the prior-year quarter.
Financial Position
Lindsay had cash and cash equivalents of $102.2 million at the end of the fiscal second quarter compared with $102.8 million recorded at the end of the comparable quarter last fiscal. The company recorded cash usage of $9 million from operating activities for the six-month period ended Feb 28, 2018, compared with positive cash flow of $10.7 million recorded in the comparable prior-year period. Lindsay had long-term debt of $116.7 million at the end of the reported quarter compared with $116.9 million recorded at the end of the prior-year quarter.
Lindsay’s backlog as of Feb 28, 2018, was $90.2 million compared with $62.3 million as of Feb 28, 2017.
Growth Initiatives
Lindsay’s growth objectives include setting strategic direction, defining priorities and improving overall operating performance. A key financial objective is to achieve operating margin performance between 11% and 12% in fiscal 2020. The company expects to incur additional costs regarding this initiative over each of the next several quarters. These additional costs are anticipated to be recovered through improved operating income in fiscal 2020.
Outlook
Lindsay’s Infrastructure business is poised to gain from a growing backlog of Road Zipper projects. The company noted that it will remain focused on providing innovative technology solutions and improving operating performance. However, the North American agricultural market conditions are expected to remain challenged due to lower commodity prices and farm income. Further, the recently-announced tariffs on steel and aluminum product imports are a concern due to the potential impact on raw-material cost and possible trade retaliation that might affect U.S. agricultural products.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
Lindsay Corporation Price and Consensus
Lindsay Corporation Price and Consensus | Lindsay Corporation Quote
VGM Scores
At this time, LNN has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, LNN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.