Average Annualized Return Per Closed Trade: 17.9%
Average Return Per Closed Trade: 15.5%
Average Holding Period: 320 days

Yesterday Lindsay Corporation (LNN) reported fiscal 2^nd quarter results. The company booked quarterly revenues $124.1 million, a year-over-year increase of 3 percent, and earned 47 cents per share (adjusted for non-recurring items), compared to 42 cents per share a year ago. Both figures beat analyst expectations.

While Lindsay’s domestic irrigation business saw negative 15 percent revenue growth to $106.2 million, hurt by harsh weather in Northwestern U.S. that discouraged potential customers from ordering and installing new systems, it saw an increase of 46 percent to $44.7 million in its international irrigation markets, driven by increased project activity in the Commonwealth of Independent States region (Eastern Europe) and Africa. Demand in Brazil also picked up.

Revenues in the irrigation segment overall improved 3 percent over the same period a year ago while operating margins ticked down slightly to 10.6 percent of sales (from 10.7 percent in the second quarter of fiscal 2016) due to a higher mix of international sales.

The other part of Lindsay, the infrastructure segment, generated revenues of $17.9 million, a 2 percent increase. Operating margin improved to 8.9 percent of sales, from 8.8 percent. Lindsay is currently spending at a relatively high level on engineering and research & development in order to meet new mass standards for road safety products, but the spending now should pay off in the future.

Lindsay’s order backlog, or future projects, totaled $62.3 million at the end of February. A year ago, it was $52.6 million.

CEO Richard Parod remarked during the conference call that soft commodity pricing and farm income continue to adversely impact demand but the overall market is stable as competitors have behaved rationally.

Parod will retire as CEO on December 1 this year after 17 years at the helm. There isn’t a replacement yet. Parod has competently overseen Lindsay’s growth over the years. Despite a difficult environment beyond its control over the past four years, Lindsay has remained a well-run company under Parod’s guidance. We will keep a close eye on who takes the reins next.

We rate LNN a “hold” at its current price.

USG Corp. (USG) fell this week after receiving a downgrade from Macquarie, from “outperform” to “neutral” due to disappointing wallboard pricing. We maintained a suggested “buy” up price of $32 for USG even as the stock ran above $34 in its recent high. USG closed today at $31.80, for our readers who don’t have already a position in the stock, we recommend a wait-and-see approach.     

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Closed Trades: