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Lindsay (LNN) Q2 Earnings & Revenues Miss Estimates, Down Y/Y

Lindsay Corporation LNN delivered adjusted net earnings of 2 cents per share in the second quarter of fiscal 2019 (ended Feb 28, 2019) compared to the 56 cents recorded in the year-ago quarter. Earnings significantly lagged the Zacks Consensus Estimate of 62 cents. Lower-than-expected sales volume in the North America irrigation segment due to the U.S.-China trade tensions and lower Road Zipper System sales affected the company’s performance. Lindsay’s share price dipped 8% to close at $85.11 on Apr 9.
Including the after-tax costs related to the company’s Foundation for Growth initiative, Lindsay incurred net loss of 32 cents in the reported quarter compared to the net earnings of 16 cents recorded in the prior-year quarter.
Lindsay generated revenues of $109.2 million, down 16% year over year. The revenue figure also missed the Zacks Consensus Estimate of $114 million.

Lindsay Corporation Price, Consensus and EPS Surprise

Operational Update
Cost of operating revenues was down 10.8% year over year to $84.7 million. Gross profit declined 31% to $24 million from the $35 million witnessed in the year-earlier quarter. Gross margin came in at 22% compared to the 27% recorded in the year-ago quarter.
Operating expenses flared up 3.2% year over year to $29 million in the quarter under review. The company reported an operating loss of $4.5 million compared to the operating profit of $7.3 million recorded in the prior-year quarter.

Segment Results

Irrigation segment revenues declined 14% year over year to $95.8 million in the fiscal second quarter. North America irrigation revenues decreased 3% from the year-ago quarter, while international irrigation revenues were up 15% year over year. The segment’s operating income plunged 37% year over year to $7.5 million in the recently-reported quarter. Its operating margin was affected by lower equipment sales volumes in North America, higher warranty costs and operational inefficiencies.

Infrastructure segment revenues dipped 27% year over year to $13.4 million, owing to soft Road Zipper System sales and road safety product sales. The segment reported operating loss of $0.4 million, primarily due to a year-over-year fall in Road Zipper System sales, compared to the operating income of $2.5 million recorded in the prior-year quarter.

Financial Position
Lindsay had cash and cash equivalents of $103 million at the end of the fiscal second quarter, flat year over year. The company utilized $40 million of cash in operating activities in the quarter compared with $9 million in the prior-year quarter. Lindsay had a long-term debt of $116 million at the end of the reported quarter, stable year on year.
Lindsay’s backlog as of Feb 28, 2019, was $44.4 million compared with $90.2 million as of Feb 28, 2018. Approximately $14.8 million of the backlog reduction was owing to business divestitures and $28.5 million was from a lower backlog of Road Zipper System orders compared to the previous fiscal year.
Growth Initiatives
In 2018, Lindsay had introduced a performance improvement initiative — Foundation for Growth — with the objective of simplifying its business. One of its key financial objectives is to achieve operating margin performance between 11% and 12% in fiscal 2020.

Over the past year, shares of Lindsay have dipped around 1.8% compared with the industry’s growth of 7.6%.

Zacks Rank and Stocks to Consider

Lindsay currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Industrial Products sector are DXP Enterprises, Inc. DXPE, Lawson Products, Inc. LAWS and Albany International Corp. AIN, each sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises has an expected earnings growth rate of 21.6% for 2019. The company’s shares have gained 16.3%, over the past year.

Lawson Products has an outstanding projected earnings growth rate of 102.5% for the current year. The stock has appreciated 26.8% in a year’s time.

Albany International has an estimated earnings growth rate of 44.7% for the ongoing year. The company’s shares have gained 12.6%, in the past year.

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