The global demand for water has been increasing at a rate twice that of population growth over the past century. This collective demand has led to water scarcity problems on every continent, significantly impacting agriculture and seriously threatening food security worldwide. The effects of climate change are expected to add to this burden, creating considerable constraints on food production throughout the globe. According to a recent study, it is anticipated that agricultural water scarcity will escalate in more than 80% of the world’s croplands by mid-century, highlighting the demand for the services of irrigation and infrastructure companies like Lindsay (NYSE:LNN). The stock could present a compelling opportunity for growth at a reasonable price (GARP) for investors looking to add a long-term water play to their portfolio.
Lindsay’s Irrigation & Infrastructure Solutions
Lindsay is an irrigation and infrastructure equipment and technology manufacturer and distributor. The company’s agricultural irrigation solutions include center pivot and lateral-move systems, remote irrigation, and Industrial Internet of Things (IIoT) solutions. Its infrastructure segment manufactures equipment to improve road safety.
Due to the decline in commodity prices, the USDA has estimated that U.S. net farm income will decrease around 25% in the coming year, a theme echoed across international agriculture. This has depressed spending on irrigation solutions, which has cut down on Lindsay’s revenue and negatively impacted its stock price.
However, management expects its infrastructure business to experience a robust growth trajectory in line with increased domestic spending due to the Infrastructure Investments and Jobs Act. The benefits of this trend are anticipated to be a long-term driver of higher demand for Lindsay’s products and solutions.
In addition, Lindsay recently announced the acquisition of a 49.9% stake in the Austrian firm Pessl Instruments GmbH, a leading player in agritech solutions under the METOS® brand. Pessl’s robust global network, with over 80,000 connected in-field data collection devices and 50,000 active users, is set to boost the company’s existing capabilities, notably adding to the use of artificial intelligence within agriculture.
Lindsay’s Recent Financials
The company recently reported quarterly financial revenues of $151.5 million, representing a decrease of $14.7 million, or 9%, compared to the $166.2 million in revenue from the same period last year. The decline can be attributed mainly to lower revenues in the irrigation segment, with infrastructure revenues holding steady compared to the same quarter in the prior year.
Despite a drop in revenues, net earnings for the quarter remained consistent at $18.1 million. Earnings per diluted share increased slightly from $1.63 to $1.64, beating the consensus estimate of $1.55.
Lindsay has also declared a regular quarterly cash dividend of $0.35 per share, payable on May 31, 2024, with a record date of May 17, 2024.
What is the Price Target for LNN Stock?
The stock has been trending downward, losing over 9% in the past year, and continues to demonstrate negative price momentum, trading below the 20-day (116.35) and 50-day (119.63) moving averages.
However, analysts following the company have been cautiously optimistic. Citing the growth potential of the company’s product and service offerings, Northcoast Research analyst Ryan Connors recently raised the price target on the stock to $142.00, while upgrading the rating to a Buy.
Lindsay is rated a Moderate Buy based on the ratings and 12-month price targets that two Wall Street analysts assigned in the past three months. The average price target for LNN stock is $134.00, which represents a 17.37% upside from current levels.
Bottom Line on LNN
As the demand for water for agriculture continues to rise, Lindsay is well-positioned to assume an increasingly vital role, and could offer investors an excellent opportunity to be part of a long-term growth story. Despite a recent revenue slump due to declining commodity prices impacting the farming sector, management has leveraged the company’s infrastructure segment to maintain earnings and support ongoing dividend payments. The stock could present investors with a compelling growth at a reasonable price solution in the irrigation and infrastructure sector.
