Lindsay's Dual Engine of Growth: Precision Water and Resilient Roads Drive Performance (NYSE:LNN) - LNN Stock Research Report

## Executive Summary / Key Takeaways * Lindsay Corporation achieved record financial performance in fiscal year 2025, with double-digit revenue and operating income growth across both its Irrigation and Infrastructure segments, demonstrating strong operational execution amidst varied market conditions. * The company's strategic geographic diversification proved crucial, as international irrigation revenues surpassed North American revenues for the first time, driven by significant project activity in the MENA region and stable demand in South America. * Technological leadership, exemplified by the acquisition of a minority interest in Pessl Instruments and the introduction of TowerWatch, is enhancing precision irrigation capabilities, driving annual recurring revenue growth, and strengthening Lindsay's competitive moat. * While North American irrigation faces persistent headwinds from low commodity prices and weak crop returns, the Infrastructure segment is poised for continued growth, supported by government funding initiatives like the IIJA and new product introductions. * Lindsay maintains a robust balance sheet with ample liquidity and a disciplined capital allocation strategy, prioritizing organic growth, strategic acquisitions, and shareholder returns, despite elevated capital expenditures planned for fiscal 2026. ## Setting the Scene: A Global Leader in Essential Solutions Lindsay Corporation, established in 1955, has evolved from a regional agricultural irrigation equipment manufacturer into a global leader in proprietary water management and road infrastructure products and services. Headquartered in Omaha, Nebraska, the company's operations are strategically divided into two reporting segments: Irrigation and Infrastructure. This dual focus positions Lindsay to address two fundamental global imperatives: increasing food production through efficient water use and enhancing transportation safety and efficiency. The company's fiscal year 2025 results, detailed in its 10-K filing on October 23, 2025, underscore its resilience and strategic execution in a dynamic global environment. The demand for Lindsay's solutions is underpinned by powerful long-term trends. A growing global population necessitates increased agricultural output, placing immense pressure on land, water, and energy resources. This drives the need for advanced irrigation systems that conserve water and energy while maximizing yields. Simultaneously, population growth and the aging of existing infrastructure fuel demand for improved road safety and congestion management solutions worldwide. Lindsay's strategic initiatives and technological advancements are directly aligned with these enduring market drivers. ## Technological Edge: The Smart Foundation for Growth Lindsay's competitive advantage is significantly bolstered by its differentiated technology and continuous innovation, particularly within its Irrigation segment. The company's Zimmatic and Perrot brands are synonymous with center pivot, lateral move, and hose reel irrigation systems, which offer substantial advantages over traditional methods like flood irrigation. These systems require less labor, can be used on diverse terrains and sandy soils, and enable precise application of water, fertilizers, and chemicals, leading to significant water and chemical conservation. Beyond mechanical systems, Lindsay has established itself as a leader in precision irrigation through its innovative technology solutions. The Elecsys brand provides Industrial Internet of Things (IIoT) technology solutions, data acquisition and management systems, and custom electronic equipment. Its subscription-based FieldNET and FieldWise platforms enable growers to remotely monitor and operate irrigation equipment, saving time and reducing water and energy consumption. These technologies leverage cellular or radio frequency communication to acquire real-time data on system status, position, and water usage. A pivotal strategic move in December 2024 was the acquisition of a 49.9% non-controlling interest in Austria-based Pessl Instruments GmbH. This partnership integrates Pessl's METOS weather stations and soil moisture probes into FieldNET and FieldWise, providing growers with more precise and real-time agronomic insights for enhanced irrigation scheduling decisions. This collaboration has expanded Lindsay's access to over 240,000 connected devices, significantly boosting its annual recurring revenue (ARR) growth, which stood at 20% year-over-year in fiscal 2025. In the fourth quarter of fiscal 2025, Lindsay further advanced its Smart Pivot platform with the introduction of TowerWatch, a new product designed to diagnose machine faults at individual towers, reducing troubleshooting time by up to 75%. This innovation directly addresses customer feedback, enhancing the FieldNET user experience and maximizing yields and profitability for growers. These technological differentiators are not merely features; they are core to Lindsay's competitive moat, driving higher efficiency for customers, fostering loyalty, and contributing to a stable, high-margin recurring revenue stream. ## Dual Engines of Growth: Segment Performance and Drivers Lindsay Corporation's fiscal year 2025 performance showcased the strength of its diversified business model, achieving record consolidated results. Total operating revenues increased 11% to $676.40 million, up from $607.10 million in fiscal 2024. Net earnings grew 12% to $74.10 million, or $6.78 per diluted share, compared to $66.30 million, or $6.01 per diluted share, in the prior fiscal year. This robust growth was supported by double-digit increases in both segments.

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### Irrigation Segment: Global Reach Offsets Domestic Headwinds The Irrigation segment, a historical cornerstone, delivered an 11% revenue increase to $568.0 million in fiscal 2025. Notably, international irrigation revenues surged 39% to $294.2 million, surpassing North American irrigation revenues of $273.8 million (which saw a 9% decrease) for the first time in the company's history. This shift underscores the critical value of Lindsay's geographical diversification. North American irrigation faced persistent headwinds in fiscal 2025. Lower unit sales volume, a less favorable mix of shorter machines, and slightly reduced average selling prices contributed to the decline. Management attributed this to softer market conditions, reduced storm damage replacement demand, and a wet summer that led to a more than 20% reduction in irrigated hours across key Midwest markets. Despite a projected 41% increase in U.S. net farm income for 2025 to $179.80 billion, primarily driven by government support payments rather than crop receipts, management anticipates North American demand to remain suppressed until commodity prices and overall net farm income meaningfully improve. Conversely, international markets provided significant tailwinds. The substantial increase in international revenues was largely driven by a multi-year supply agreement valued at over $100 million for a large irrigation project in the MENA region, with deliveries continuing into fiscal 2026. Additionally, higher sales volumes in Brazil and other parts of South America, benefiting from increased agricultural exports to China, contributed to this growth, partially offsetting a $9.50 million unfavorable impact from foreign currency translation. Lindsay also secured an additional $20 million project in the MENA region, expected to be completed in Q1 fiscal 2026. The long-term growth opportunity in Brazil is significant, with low irrigation adoption rates and the potential for multiple crops per year. ### Infrastructure Segment: Road Safety and Project Momentum The Infrastructure segment demonstrated strong performance, with revenues increasing 16% to $108.4 million in fiscal 2025. This growth was primarily fueled by higher Road Zipper System project sales and slightly increased road safety product sales. The segment's gross margin expanded to 41.4% in fiscal 2025 from 38.2% in fiscal 2024, reflecting a more favorable margin mix from higher Road Zipper System sales. Operating income for the segment surged 39% to $26.3 million, with an operating margin of 24.3%.

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Key operational achievements included the completion of a large Road Zipper project in the Northeast, valued at over $20 million, which was fully delivered in the second fiscal quarter of 2025. The company also received FHWA approval for its new TAO XR Express Repair crash cushion, designed for high-frequency impact locations, enhancing safety and ease of maintenance. The Infrastructure Investment and Jobs Act (IIJA), providing $110 billion in incremental federal funding for transportation projects through September 2026, continues to support demand for Lindsay's transportation safety products. ## Financial Strength and Capital Allocation Lindsay Corporation maintains a robust financial position, characterized by strong liquidity and a disciplined capital allocation strategy. Cash and cash equivalents grew to $250.60 million at August 31, 2025, from $190.90 million a year prior. Total available liquidity, including its $50 million revolving credit facility (undrawn), stood at over $300 million at the end of fiscal 2025.

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Cash flows provided by operating activities totaled $132.90 million in fiscal 2025, a significant increase from $95.80 million in fiscal 2024, driven by higher net earnings and effective working capital management. This resulted in free cash flow of 122% of net earnings, totaling $90.41 million.

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The company's capital allocation priorities include investing in organic growth, pursuing synergistic acquisitions, consistently paying and increasing dividends, and opportunistic share repurchases. Capital expenditures for fiscal 2025 were $42.50 million, and are projected to increase to between $50 million and $55 million for fiscal 2026. This increase is primarily allocated to equipment replacement, productivity improvements, new product development, and commercial growth investments, including the modernization of manufacturing facilities and the expanded scope of a next-generation galvanizing facility at its Lindsay, Nebraska plant, now expected to be completed by the end of calendar year 2026. While elevated CapEx may temper free cash flow slightly in fiscal 2026, these investments are crucial for long-term efficiency and capacity. The company also repurchased $11.50 million of common stock in fiscal 2025, with $30 million remaining under its $250 million authorization. ## Competitive Landscape and Strategic Positioning Lindsay operates in competitive markets, facing both large, diversified players and specialized regional manufacturers. In the U.S. center pivot irrigation market, it competes with four other major manufacturers. The international irrigation market includes these leading U.S. firms and various regional players. Lindsay differentiates itself through continuous product improvement via R&D, channel initiatives, and operational strategies, emphasizing innovative technology like GPS, variable rate irrigation, and wireless management. The company believes it competes favorably on price, product quality, durability, controls, dealer reputation, and customer service. Key direct competitors include Valmont Industries (TICKER:VMI), Deere & Company (TICKER:DE), and The Toro Company (TICKER:TTC). While VMI and DE possess greater scale and diversified portfolios, Lindsay's specialized focus on water management and road safety, coupled with its advanced IIoT technology, provides a distinct competitive edge. Lindsay's integrated solutions, such as FieldNET Advisor, offer superior efficiency in resource optimization, potentially leading to higher customer loyalty and recurring revenue streams. In contrast to large equipment OEMs like Deere, Lindsay's factory-to-field shipping model for irrigation equipment avoids the channel destocking issues that can impact reported revenues. In the Infrastructure segment, Lindsay's Road Zipper System faces limited direct competition, though it competes with traditional concrete barriers. Its crash cushions compete in a broader market. The company's ISO 17025 certified testing laboratory and compliance with MASH standards are critical for maintaining its competitive position and eligibility for government-funded projects. While larger competitors might have greater R&D budgets, Lindsay's targeted innovation in areas like the TAO XR Express Repair crash cushion demonstrates its ability to deliver impactful, market-specific solutions. ## Outlook and Risks Looking ahead to fiscal year 2026, Lindsay anticipates a mixed but strategically managed environment. North American irrigation volumes are expected to decline by low to mid-single digits, with overall revenue remaining flattish due to offsetting price increases and growing subscription revenue. International irrigation revenues are projected to be up slightly, driven by continued project activity in the MENA region and improving conditions in South America and Australia. The Infrastructure segment is expected to see growth in Road Zipper System leasing and road safety product sales, though a large project comparable to fiscal 2025's $20 million delivery is not currently anticipated, with smaller projects expected to fill some of the gap. The Infrastructure segment's operating margin is expected to normalize around 20% without the benefit of large project sales. Several risks could impact this outlook. Fluctuations in agricultural commodity prices and net farm income remain primary drivers of irrigation demand. Government policies, including the expiration of the Farm Bill (though extended by the OBBBA) and the impact of the IIJA, significantly influence both segments. International trade barriers, geopolitical instability (as seen with paused sales to Russia and Belarus), and currency exchange rate volatility pose risks to international sales and profitability. The company also faces product liability lawsuits related to its X-Lite end terminal, which could result in significant costs and reputational harm, although management believes it has meritorious defenses and adequate insurance coverage. Finally, changes in raw material prices, particularly steel and zinc, could impact production costs and margins, though Lindsay has demonstrated an ability to pass through such increases. ## Conclusion Lindsay Corporation's fiscal year 2025 performance underscores its strength as a diversified industrial leader, adept at leveraging its technological prowess and global footprint to achieve record results. The company's strategic pivot towards international irrigation markets, where food security and water scarcity are powerful long-term drivers, has successfully offset domestic agricultural headwinds, marking a historic shift in revenue contribution. Its Infrastructure segment continues to capitalize on essential road safety and congestion management needs, supported by government investment. Lindsay's commitment to innovation, exemplified by its IIoT platforms and strategic partnerships like Pessl Instruments, is not merely about product enhancement; it's about building a sustainable competitive moat through precision and efficiency, driving high-margin recurring revenue. While near-term challenges persist in North American agriculture and project timing remains a variable, Lindsay's disciplined capital allocation, ongoing manufacturing modernization, and robust balance sheet position it to continue delivering value. Investors should recognize Lindsay's resilience and its strategic alignment with critical global trends, making it a compelling long-term investment in essential infrastructure and sustainable agriculture.