Lindsay Sell-Off Hits Valmont Unusually Hard (LNN, VMI)

Lindsay Corporation (NYSE: LNN) is seeing a severe reaction to its earnings report this morning.  In fact, the fallout is hitting competitors rather hard as well.  We first noticed this one over in our screening at VOLUME SPIKE in unusual movers  to the downside and decided to look deeper here as this has been one of the agriculture plays and huge winners over the last year.

Lindsay’s revenues rose 54% to $143.6 million from $93.1 million for the year-ago period; and net earnings were $14.1 million or $1.15 EPS, compared with $7.5 million or $0.62 EPS in the prior year’s third quarter.  There were only two estimates but the estimates from First Call were at $1.22 EPS on $137.2 million.

As previously disclosed in an 8-K filing on May 5, 2008, a third quarter correction of previously recognized tax expense resulted in a reduction in income tax expense of approximately $1.1 million and a $0.09 increase to earnings per diluted share for the third quarter.  Shares are down over 17% at $103.11 today on about 6-times volume in not even two hours of trading.  Its 52-week trading range is $35.28 to $131.14.

The company noted that its entire irrigation equipment revenues rose by 60% to $120.6 million from $75.4 million in the prior fiscal year’s third quarter.  Its domestic irrigation revenues were up 46% and international rose 95% from last year’s quarter. Infrastructure revenues rose 30% to $23.0 million compared with $17.7 million in the prior year period.

One issue is that the company posted slightly lower gross margins on lower infrastructure margins resulting from an unfavorable product mix and higher input costs.  The company’s backlog was listed as $84.4 million, up from $30.0 million at May 31, 2007.

Lastly, the company noted that irrigation equipment demand and agriculture economic indicators continue to remain strong.  The company did note that it plans to continue growing internally and via acquisitions. 

As we noted at VOLUME SPIKE (vsinvestor.com) we saw a huge fallout in a competitor called Valmont Industries, Inc. (NYSE: VMI) with its shares down well over 10% on strong volume as well.  It also saw a large move over the last year, but not as much as it is more diversified in operations.

Jon C. Ogg
June 18, 2008