Shares of Lindsay Corporation LNN tumbled around 8.9% to close at $71.61 yesterday, after the company reported dismal second-quarter fiscal 2016 results (ended Feb 29, 2016). Second-quarter adjusted earnings plunged 44% year over year to 42 cents per share. Earnings also missed the Zacks Consensus Estimate of 58 cents.
On a reported basis, the company swung to a loss of 37 cents per share from earnings of 75 cents reported in the year-ago quarter.
The irrigation equipment manufacturer reported revenues of $120.6 million, which fell short of the Zacks Consensus Estimate of $126.7 million. Revenues also decreased around 14% from $141 million in the prior-year quarter.
Total irrigation equipment revenues declined 5% year over year to $103 million. U.S. irrigation revenues increased 6% year over year to $72.3 million, primarily on the back of revenues from acquired companies, including Elecsys Corporation.
International irrigation revenues plummeted 24% to $30.8 million due to unfavorable currency impact. On the other hand, infrastructure revenues fell 47% to $17.5 million primarily owing to the completion of the Golden Gate Bridge Road Zipper project in the prior year and decreases in Contract and Tubing markets.
Operational Update
Cost of operating revenues declined 13% year over year to $88 million. Gross profit decreased 18% to $32.4 million from $39.6 million in the year-ago quarter. Gross margin contracted 110 basis points to 26.9%.
Operating expenses went up 48% year over year to $37 million in the quarter. The company posted an operating loss of $4.7 million contrary to an operating income of $14.5 million in the year-ago quarter.
Lindsay’s backlog as of Feb 29, 2016 was $52.6 million compared with $74.3 million as of Feb 29, 2015, and $61.9 million as of Nov 30, 2015.
Financial Position
Lindsay had cash and cash equivalents of $89.5 million at the end of the second quarter of fiscal 2016 compared with $77.7 million in the prior-year quarter. The company posted cash usage of $5 million for the six-month period ended Feb 29, 2016, as against cash flow of $15.6 million in the comparable year-ago period. Lindsay had long-term debt of $117 million at the end of the quarter, flat year over year.
During the fiscal second quarter, Lindsay repurchased 332,949 shares for $23 million. As of Feb 29, 2016, shares worth around $79.8 million remained under the company’s buyback program.
Outlook
Lindsay’s irrigation markets continue to be constrained by lower commodity prices and foreign exchange rates. However, long-term trends remain positive for Lindsay owing to increased agricultural production for the growing population, higher food production, efficient water use and infrastructure upgrades, and expansion.
Zacks Rank
Lindsay currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the sector include Astec Industries, Inc. ASTE, Briggs & Stratton Corporation BGG and AptarGroup, Inc. ATR. All these stocks hold a Zacks Rank #2 (Buy).
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