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Lindsay (LNN) Gains From Solid Demand Despite Higher Costs
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Lindsay Corporation (LNN - Free Report) is benefiting from solid demand, a strong balance sheet and a focus on introducing technologically advanced products amid headwinds from rising interest rates and a rapid increase in input costs.
Shares of the Zacks Rank #3 (Hold) company have lost 6.4% in the past year compared with the industry’s fall of 4.9%.
Image Source: Zacks Investment Research
Lindsay has been witnessing robust demand for irrigation equipment in North America, driven by strong agricultural commodity prices and robust business growth. This momentum, along with increased concerns around food security as a result of the pandemic and Russia-Ukraine conflict, is driving growth in the company’s international markets.
Lindsay is benefiting from a combination of increased selling prices and higher unit sales volumes in most international irrigation markets, including Australia, New Zealand, Western Europe and Brazil. The company is focused on expanding efficient irrigation in the country, backed by year-over-year higher government financing incentives for irrigation investments.
The company’s Infrastructure segment is benefiting from higher sales of road safety products and Road Zipper System project sales. The segment is poised to grow on strong momentum in Road Zipper System, going forward.
The USDA (U.S. Department of Agriculture) projects net farm income at $136.9 billion for 2023, suggesting a 15.9% decline from that reported in 2022. The decline is mainly due to elevated production expenses and lower direct government payments. Nevertheless, despite this decline, net farm income in 2023 will be 26.6% above the 20-year average (2002-2021) of $108.1 billion in inflation-adjusted dollars.
The need to replace aging equipment will sustain demand for Lindsay Corporation. Also demand for its equipment will continue to be supported by increased global demand for food, both from population growth and an increasing proportion of the population aspiring for better living standards. Drought and water scarcity issues in the United States and other parts of the world support the need for efficient irrigation.
Lindsay also has a strong balance sheet, which will help it navigate the current global economic uncertainty. As of Nov 30, 2022, the company had available liquidity of $160.6 million, with $110.6 million in cash, cash equivalents and marketable securities, and $50 million available under the revolving credit facility. Lindsay’s capital allocation plan is to continue investing in organic growth and make synergistic acquisitions, while enhancing returns to stockholders. Capital expenditure for fiscal 2023 is expected between $20 million and $25 million, including equipment replacement, productivity improvements and commercial growth investments.
However, the company has been witnessing a rapid increase in input costs, particularly of steel and zinc used in the production of its products. Constraints on the availability of raw materials, labor and trucking resources have led to higher lead times for deliveries. LNN continues to introduce appropriate sales price adjustments to combat cost inflation. However, competitive market pressures may affect its ability to pass price adjustments to its customers. These factors will impact margins in the short term.
OI Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 16% north in the past 60 days. OI’s shares gained 70.2% in the last year.
Tenaris has an average trailing four-quarter earnings surprise of 11.5%. The Zacks Consensus Estimate for TS’ 2023 earnings is pegged at $6.04 per share. This indicates a 39.5% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 17% in the past 60 days. Its shares gained 3.8% in the last year.
The Zacks Consensus Estimate for Illinois Tool Works’ fiscal 2023 earnings per share is pegged at $9.61, suggesting an increase of 4.8% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 4% upward in the last 60 days. ITW has a trailing four-quarter average earnings surprise of 0.9%. Its shares gained 9% in the last year.
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Lindsay (LNN) Gains From Solid Demand Despite Higher Costs
Lindsay Corporation (LNN - Free Report) is benefiting from solid demand, a strong balance sheet and a focus on introducing technologically advanced products amid headwinds from rising interest rates and a rapid increase in input costs.
Shares of the Zacks Rank #3 (Hold) company have lost 6.4% in the past year compared with the industry’s fall of 4.9%.
Image Source: Zacks Investment Research
Lindsay has been witnessing robust demand for irrigation equipment in North America, driven by strong agricultural commodity prices and robust business growth. This momentum, along with increased concerns around food security as a result of the pandemic and Russia-Ukraine conflict, is driving growth in the company’s international markets.
Lindsay is benefiting from a combination of increased selling prices and higher unit sales volumes in most international irrigation markets, including Australia, New Zealand, Western Europe and Brazil. The company is focused on expanding efficient irrigation in the country, backed by year-over-year higher government financing incentives for irrigation investments.
The company’s Infrastructure segment is benefiting from higher sales of road safety products and Road Zipper System project sales. The segment is poised to grow on strong momentum in Road Zipper System, going forward.
The USDA (U.S. Department of Agriculture) projects net farm income at $136.9 billion for 2023, suggesting a 15.9% decline from that reported in 2022. The decline is mainly due to elevated production expenses and lower direct government payments. Nevertheless, despite this decline, net farm income in 2023 will be 26.6% above the 20-year average (2002-2021) of $108.1 billion in inflation-adjusted dollars.
The need to replace aging equipment will sustain demand for Lindsay Corporation. Also demand for its equipment will continue to be supported by increased global demand for food, both from population growth and an increasing proportion of the population aspiring for better living standards. Drought and water scarcity issues in the United States and other parts of the world support the need for efficient irrigation.
Lindsay also has a strong balance sheet, which will help it navigate the current global economic uncertainty. As of Nov 30, 2022, the company had available liquidity of $160.6 million, with $110.6 million in cash, cash equivalents and marketable securities, and $50 million available under the revolving credit facility. Lindsay’s capital allocation plan is to continue investing in organic growth and make synergistic acquisitions, while enhancing returns to stockholders. Capital expenditure for fiscal 2023 is expected between $20 million and $25 million, including equipment replacement, productivity improvements and commercial growth investments.
However, the company has been witnessing a rapid increase in input costs, particularly of steel and zinc used in the production of its products. Constraints on the availability of raw materials, labor and trucking resources have led to higher lead times for deliveries.
LNN continues to introduce appropriate sales price adjustments to combat cost inflation. However, competitive market pressures may affect its ability to pass price adjustments to its customers. These factors will impact margins in the short term.
Stocks To Consider
Some better-ranked stocks from the Industrial Products sector are OI Glass (OI - Free Report) , Tenaris (TS - Free Report) , and Illinois Tool Works (ITW - Free Report) . OI and TS flaunt a Zacks Rank #1 (Strong Buy) at present, and ITW has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
OI Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.57 per share. This indicates an 11.7% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 16% north in the past 60 days. OI’s shares gained 70.2% in the last year.
Tenaris has an average trailing four-quarter earnings surprise of 11.5%. The Zacks Consensus Estimate for TS’ 2023 earnings is pegged at $6.04 per share. This indicates a 39.5% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 17% in the past 60 days. Its shares gained 3.8% in the last year.
The Zacks Consensus Estimate for Illinois Tool Works’ fiscal 2023 earnings per share is pegged at $9.61, suggesting an increase of 4.8% from that reported in the last year. The consensus estimate for fiscal 2023 earnings moved 4% upward in the last 60 days. ITW has a trailing four-quarter average earnings surprise of 0.9%. Its shares gained 9% in the last year.