It has been about a month since the last earnings report for Lindsay (LNN). Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lindsay due for a pullback? 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 catalysts.
Lindsay Q3 Earnings Beats Estimates, Revenues In Line
Lindsay delivered adjusted net earnings of 93 cents per share in third-quarter fiscal 2020 (ended May 31 2020) compared with 50 cents per share in the prior-year quarter. The bottom-line figure surpassed the Zacks Consensus Estimate of 80 cents. The company's Foundation for Growth initiative continues to drive margins despite the impact of COVID-19 related delays in shipments on the top line.
Including the after-tax costs related to the company's Foundation for Growth initiative, net earnings for the reported quarter were 93 cents compared with 27 cents in the prior-year quarter.
Lindsay generated revenues of $123 million, up 2% year over year. The top-line figure came in-line with the Zacks Consensus Estimate. Shipment and project delays related to COVID-19 impacted revenues by approximately $14 million.
Cost of operating revenues declined 8% year over year to $83 million. Gross profit increased 32% to $40 million from year-earlier quarter. Gross margin came in at 32.2% compared with 24.8% in the year-ago quarter.
Operating expenses declined 7% year over year to $24 million in the fiscal third quarter. The company reported an operating income of $15.8 million compared with $4.5 million in the prior-year quarter. Operating margin came in at 12.9% compared with 3.7% in the last year quarter.
The Irrigation segment revenues declined 5% year over year to $94 million in the fiscal third quarter. North America irrigation revenues decreased 3% from the year-ago quarter owing to lower irrigation equipment unit volumes, which was partially negated by the impact of higher average selling prices. International irrigation revenues fell 9% year over year, as higher sales volumes in certain regions were offset by unfavorable effects of foreign currency translation and COVID-19 related shipment delays. The segment's operating income surged 36% year over year to $15 million driven by improved cost and pricing performance stemming from the Foundation for Growth initiative and increased margin contribution from technology products and services.
The Infrastructure segment revenues increased 32% year over year to $29.6 million, driven by higher year-over-year sales of Road Zipper System and lease revenues. However, lower sales of road safety products and COVID-19 related project delays somewhat offset these gains. The segment reported an operating income of $8.6 million compared with $3.5 million in the prior-year period owing to increased sales in higher margin product lines, and improved cost and pricing performance.
Lindsay had cash and cash equivalents of $102.4 million at the end of the fiscal third quarter compared with $127 million at the end of the prior fiscal.
During the quarter Lindsay completed the acquisition of Net Irrigate, LLC, which will expand the number of irrigated acres managed under the company's FieldNET platform. Net Irrigate is an agriculture IoT technology company that provides remote monitoring solutions for irrigation customers.
Lindsay's backlog of unfilled orders as of May 31, 2020 was $78.6 million compared with $52.5 million at May 31, 2019.
Irrigation equipment demand in North America in Lindsay's fiscal fourth quarter is historically driven primarily by storm damage replacement. This along with low commodity prices makes the outlook uncertain for the segment in the ongoing quarter. The infrastructure business is however poised to grow driven by the Highways England project and the fulfillment of a large order in Japan. Also, momentum in Road Zipper Systems will contribute to the segment's results.
A variety of factors that could impact commodity prices and farm income including current year crop results, export demand related to the U.S.-China Phase 1 trade agreement, and the level of government support payments to assist farmers are likely to weigh on demand for the company's products in fiscal 2021. Nevertheless, it expects continued growth in technology products and services due to the solid returns these investments provide to farmers. In international markets demand will remain strong driven by growing concerns regarding food security as a result of the global pandemic.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 8.33% due to these changes.
At this time, Lindsay has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Lindsay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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