Lindsay Corporation: Earnings Preview

Lindsay Corporation (LNN) is slated to report its second-quarter 2012 results before the market opens on March 28. The Zacks Consensus Estimate for the quarter is 83 cents per share, representing an estimated year-over-year decrease of 6.37%. Revenues, as per the Zacks Consensus Estimate, is $129 million.

First Quarter Synopsis

The company, in the first quarter (ended November 30, 2011), reported adjusted earnings of 60 cents per share, beating the Zacks Consensus Estimate of 46 cents and exceeding the year-ago earnings of 38 cents.

Revenues in the reported quarter increased 34% year over year to $119 million, comfortably surpassing the Zacks Consensus Estimate of $102 million.

Lindsay, which competes with Valmont Industries Inc. (VMI), experienced growth in its top-line due to an increase in total irrigation equipment revenues that registered $100.8 million, up 68% year over year. This was attributable to a rise in domestic as well as international irrigation revenues.

Estimate Revision Trend

Agreement

Out of the 9 analysts covering the stock, none have revised their estimates for the second quarter in either direction over the last 7 and 30 days. A similar trend applies for fiscal 2012.

Magnitude

The Zacks Consensus Estimates remained the same for both the second quarter and fiscal 2012 over the last 7 and 30 days.

Earnings Surprise History

With respect to earnings surprise, Lindsay has topped the Zacks Consensus Estimate in three of the last four quarters while it missed the estimate on one occasion. The company has delivered an average positive earnings surprise of 13.61% over the preceding four quarters, implying that it has beaten the Zacks Consensus Estimate by that measure.

Our Take

The United Sates Department of Agriculture predicts that the net farm income will remain high at $91.7 billion in 2012, down 6.5% from 2011 forecast. It also predicted that the sales of corn, other food grins and peanuts will offset the declines in sales of wheat, hay, vegetables/melons, and fruits/tree nuts. Lindsay's irrigation segment will thus benefit from rising farm income. Lindsay expects to benefit in the long term from the demand for increased food production, driven by worldwide population growth, efficient water use, mounting need for biofuel and improving transportation infrastructure.

Lindsay's Infrastructure revenues depend on government funding of transportation projects. The segment has been experiencing pressure from budget cutbacks. Moreover, the latest extension of the government's authority to spend money from the trust fund that pays for transportation program will be expiring on March 31, 2012. Thus, the infrastructure segment's outlook remains unclear due to government budget constraints and a delay in the congressional passage of a new federal highway bill.

Our long-term recommendation on Lindsay remains Neutral. Currently, the stock retains a Zacks #3 Rank, implying a short-term "Hold" rating.

LINDSAY CORP (LNN): Free Stock Analysis Report

VALMONT INDS (VMI): Free Stock Analysis Report