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Lindsay to Underperform
By: Zacks Equity Research
November 27, 2009

Lindsay Corp. (LNN - Analyst Report) is a leading designer and manufacturer of self-propelled center pivot and lateral move irrigation systems. The company derives more than 75% of its revenue from irrigation equipment business, with the remaining coming from its infrastructure
segment.

Deteriorating economic conditions and significant fall in agricultural commodity prices have had an unfavorable impact on the irrigation segment’s incoming order rate during fiscal 2009. Domestic irrigation revenues declined 34%, while international irrigation revenues declined 28% during the fiscal year.

The U.S. Department of Agriculture forecasts a 38% decline in net farm income to $54 billion in 2009 from an estimated $87.1 billion last year. This is lower than the last 10 year average farm income of $63.6 billion. Given the lower expected farm income and lack of credit availability, we believe farmers will stay away from purchasing capital goods in the near term.

Even in the infrastructure segment, Lindsay witnessed a 19% decline in revenues in fiscal 2009. During the past several months, federal, state and local governments have cut down spending on infrastructure projects, pending availability of funds. Though the stimulus funds have slightly
improved the demand for road infrastructure products in the U.S., the uncertainty surrounding the new federal highway bill continues to temper the segment’s outlook.

We are downgrading the rating on the stock to Underperform as lower expected farm income and uncertainty surrounding reauthorization of the federal highway bill are adversely impacting the company’s incoming order rate. The near-term revenue visibility remains very low for Lindsay. The company does not expect substantial recovery in its end markets in fiscal 2010.

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