Irrigation and infrastructure play Lindsay gave a bullish, Brazil-driven outlook for the new fiscal year Thursday, after crushing earnings estimates for its fourth quarter. LNN stock rocketed above a key level.
Based in Omaha, Neb., Lindsay manufactures large-scale, mobile irrigation systems and related technology products. Its infrastructure business provides an array of crash barriers, signage, guard rails and other components often used in traffic management and road building.
In the current first quarter so far, the company is seeing orders for irrigation equipment "running ahead of the prior year. We expect sales volume levels in developed international markets to remain robust, led by strong demand in Brazil," Lindsay CEO Randy Wood said in an earnings release.
South America's largest country is in the middle of a historic drought, which could drive up demand for irrigation equipment. The government of returning President Luiz Inacio Lula da Silva is also pushing an ecological transformation plan.
Lindsay Stock Rallies
Shares of Lindsay gapped up almost 15% to 122.58 on the stock market today. Lindsay stock bounded above the 50-day moving average, but met resistance at the 200-day average.
The farm machinery stock slumped this year amid declining sales, after surging for much of 2022.
Over the next five years, Lindsay targets above 7% annual growth in organic revenue and more than 10% growth in earnings per share, a company earnings presentation showed on Thursday.
Lindsay Earnings
For the fourth quarter, which ended Aug. 31, Lindsay posted earnings of $1.74 per share, smashing expectations for $1.11, FactSet data shows. Revenue of $167.1 million also beat.
Year over year, Lindsay earnings grew 7% while revenue slid 12%, due to weakness in the infrastructure business and North American irrigation markets.
This was offset by growth in international irrigation markets, led by South America. Irrigation generated about 85% of company revenue during the quarter. About 58% of irrigation revenue came from international markets.
The company achieved record Q4 revenue in Brazil during the quarter. It tied higher international irrigation sales volume to "available funding under the government financing plan in Brazil."
Brazil Drought, Green Plan
A historic drought has sent water levels at a major river port in Brazil's Amazon rainforest to the lowest point in at least 121 years.
The extreme drought sweeping across parts of the country could last until early 2024, experts say.
Amid drought and wildfires, the Brazilian government under President Lula is developing tools to help finance its ecological transformation plan, Bloomberg reported in September. It expects to have the plans ready by year end, the report said.
The green plan includes the creation of a regulated carbon market. It also includes the issuance of government bonds linked to social and environmental projects, as well as measures to gradually end subsidies for fossil fuels. Bloomberg said the plan is designed to boost Brazil's economy and kick-start a green transition in Latin America's largest economy.
In the U.S. and North American markets, Lindsay said Thursday it expects commodity prices and farm income projections to continue to support demand for irrigation equipment. However, those prices and projections are lower compared to a year ago.
Meanwhile, extreme drought conditions seen in the U.S. in 2022 have eased this year.
At the start of 2023, the California drought seemed to influence a $7.5 billion deal between water technologies provider Xylem and Evoqua Water Technologies.
