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Infrastructure Segment, Rising Farm Income to Aid Lindsay (LNN)

Zacks.com logo Zacks.com 11/30/2020

On Nov 27, we issued an updated research report on Lindsay Corporation LNN. The company’s Foundation for Growth initiative continues to progress and is driving the bottom line. Improving farm income in the United States and introduction of technologically advanced products will aid the irrigation segment. The infrastructure business is poised well for growth courtesy of strong demand for Road Zipper projects and transportation safety products.

Foundation for Growth Initiative: A Game Changer

Lindsay’s Foundation for Growth initiative — a performance improvement initiative launched in 2018 — continues to progress and is bringing positive changes. The company is realizing performance improvements, revenue gains, cost savings and other benefits from this initiative. A key financial objective of the initiative was to achieve operating margin performance between 11% and 12% by fiscal 2020, which the company has realized as evident from operating margin of 11.4% in fiscal 2020. The Foundation for Growth initiative is expected to improve the company’s overall net earnings in the days ahead.

Infrastructure Business Poised to Grow

The company’s infrastructure business is poised to grow on the Highways England project. Also, momentum in Road Zipper Systems will contribute to the segment’s results. Lindsay’s Road Zipper System is a highly differentiated product that positively addresses key infrastructure needs such as reducing congestion, lowering carbon emission, and increasing driver safety. Thereby, it has been gaining popularity globally.

In September 2020, the Fixing America's Surface Transportation (FAST) Act has been extended for one year. The extension includes $13.6 billion to maintain the Highway Trust Fund's solvency at current funding levels ($47.1 billion for highway programs and $12.3 billion for transit programs) through fiscal year 2021. This extension will provide much-needed funding certainty to state and local governments navigating significant revenue shortfalls due to the COVID-19 pandemic.

Improving Farm Dynamics Bodes Well

Per the U.S. Department of Agriculture's (USDA) latest available projections, net farm income is anticipated to increase 22.7% year over year to $102.7 billion in 2020. Also, global commodity prices have regained ground after declining significantly earlier in the year amid the pandemic. This turnaround was aided by an improving demand environment and lower yield expectations in the United States. Pickup in commodity prices and farm income will persuade farmers to resume spending on agricultural equipment, which in turn will drive Lindsay’s top line.

Technology to Provide Competitive Edge

Lindsay anticipates its irrigation operating margin performance in the United States to benefit from strength and growth of innovative technology products, and Foundation for Growth initiative. In April 2020, the company completed the buyout of Net Irrigate, LLC, which will expand the number of irrigated acres managed under the company’s FieldNET platform. This acquisition strengthens Lindsay’s market position in remote monitoring capabilities. Net Irrigate is an agriculture IoT technology company that provides remote monitoring solutions for irrigation customers.

Price Performance

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Lindsay’s shares have gained 26.9% in the past year compared with the industry’s rally of 53.3%.

Zacks Rank

At present, Lindsay carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Some other top-ranked stocks in the Industrial Products sector include iRobot Corporation IRBT, Crown Holdings, Inc. CCK and SiteOne Landscape Supply, Inc. SITE. While iRobot flaunts a Zacks Rank #1, Crown Holdings and SiteOne Landscape carry a Zacks Rank of 2, at present.

iRobot has an estimated earnings growth rate of 18.8% for the ongoing year. Shares of the company have gained 81% in the past year.

Crown Holdings has a projected earnings growth rate of 11.7% for fiscal 2020. Over the past year, the company’s shares have appreciated 26%.

SiteOne Landscape has an expected earnings growth rate of 28.6% for 2020. The stock has climbed 57% a year.

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