Lindsay Corp Q3 Misses Street as Wet Spring Delays Irrigation Sales

Lindsay Corporation posted fiscal third-quarter results that came up short of Wall Street estimates, with a wet spring in the northern plains compressing the selling season for its core irrigation equipment.

Adjusted earnings reached $1.42 a share for the quarter ended May 31, below the $1.54 analyst consensus. Revenue totaled $155.2 million, roughly 4% under the $162 million the Street had modeled. The miss was concentrated in the irrigation segment. Sales there dropped 12% year over year to $119 million, down from $135 million in the same quarter last year. Infrastructure revenue rose 6% to $36 million, not enough to offset the irrigation decline.

North America irrigation revenue fell 10%. Management said delayed spring planting in the Midwest and northern plains pushed back the typical spring application window. That compressed the selling season for pivot irrigation systems and replacement parts. International irrigation revenue slid 15%. Weakness in Brazil and Australia was the driver. Dry conditions there reduced farmer willingness to take on credit, slowing equipment replacement cycles.

Gross margin narrowed 180 basis points to 28.9% from 30.7% a year ago. Higher steel costs and a less favorable product mix accounted for the compression. The company sold more lower-margin replacement parts and fewer full-system installations. Selling, general and administrative expenses rose $1.2 million to $32.5 million, reflecting higher incentive compensation and trade show spending.

Operating income for the quarter was $12 million, down from $15.2 million a year earlier. The irrigation segment's operating margin fell to 11.5% from 14.2%. Infrastructure margins held roughly flat at 9.8%.

Free cash flow for the first nine months of the fiscal year was $48 million, down from $62 million a year earlier. The decline reflected working capital buildup from the slower spring season. Management indicated that the buildup is seasonal and should reverse as dealer inventories clear in the fourth quarter. Lindsay's balance sheet stayed clean. Cash on hand was $67 million against $39 million in total debt.

Lindsay did not issue formal guidance for the full year, a common practice for the company. On the earnings call, management struck a cautious tone. Dealer inventories of irrigation equipment remain elevated, which could weigh on fourth-quarter orders. The company also noted that its large-diameter steel pipe backlog benefited from drought-relief infrastructure programs in the U.S. West. Those projects are largely bid and won, limiting near-term revenue upside from that line.

Shares traded near $112 after the print. The stock has fallen roughly 15% from its 52-week high set in March.