Lindsay Corp's Demand Forecast Looks Grim For Fall Season: Analyst Highlights Dealer Issues

Stifel analyst Nathan Jones downgraded Lindsay Corporation LNN to Hold from Buy, lowering the price target to $135 from $146.

Jones recently completed a Proprietary Irrigation Survey of 50 of Lindsay's domestic irrigation dealers, following which volumes are now expected to be -0.8% vs. -0.7% over the next 12 months.

Dealers reported domestic volume down 1.9%, with prices up 0.9% over the past three months, the analyst adds.

In the next three months, volume is expected to be down 0.1% y/y. 

Dealers expect volume over the next three and 12 months to be roughly flat at -0.1% y/y and be down 0.8% y/y, respectively, according to the analyst. 

When asked about the potential for spending to the dealers, they stated they don't anticipate any significant ramp in spending post-harvest in the fall season, given market uncertainties.

However, dealers stated there is likely a more significant potential for repair and maintenance work post-harvest as growers ran their machines longer to maintain yields during this hot and dry summer, the analyst adds. 

On the positive side, based on recent trends, the end of the growing selling season, tough comparisons, and dealers' history of underestimating the magnitude of change, the analyst thinks the dealer forecast is likely to prove very optimistic. 

Looking forward, most dealers (88% during this quarter vs. 56% last quarter) don't anticipate further price increases from Lindsay and expect Lindsay to hold prices steady.

The analyst estimates FY23E EPS (net) of $5.87, with revenues of $663.5 million.

Price Action: LNN shares are trading lower by 10.58% to $114.30 on Friday.