Lindsay Corporation's Q3 Surge: Riding Global Food Security and Drought-Driven Demand

Lindsay Corporation (LNN) delivered a standout third-quarter performance, with international irrigation revenues soaring 60% year-over-year to $74.7 million, fueled by massive projects in the Middle East and North Africa (MENA) region. This growth, paired with margin expansion and a fortress balance sheet, positions the company as a prime beneficiary of global food security trends and cyclical demand resilience.

International Momentum and Margin Strength

The 60% surge in international irrigation revenue was driven by a $24 million contribution from a large MENA project—exceeding its typical $20 million quarterly pace—and strong sales in Brazil and South America. While foreign currency headwinds reduced revenue by $2.5 million, the irrigation segment's operating margin expanded to 18.9% (up from 17.0% in 2024), reflecting operational efficiencies and recurring revenue streams from its FieldNET Advisor subscription service. This technology-driven model not only improves margins but also locks in long-term customer relationships.

The company's MENA pipeline remains robust, with a new $20+ million project set to boost shipments through early 2026. Management's focus on food security infrastructure in emerging markets aligns with a secular trend: governments in water-scarce regions are prioritizing agricultural efficiency, creating a multiyear tailwind for Lindsay.

Resilience Amid Cyclical Challenges

While North American irrigation revenue grew just 1% to $69.1 million—due to tariff uncertainty and weak U.S. grain exports—the company highlighted a silver lining: drought conditions in the Midwest are driving demand for replacement parts. This underscores Lindsay's ability to profit even in cyclical downturns, as farmers prioritize maintenance over new equipment purchases.

The infrastructure segment, which supplies road safety systems, saw a 6% revenue rise but margin compression to 21.1% (down from 25.8%) due to product mix shifts. However, this segment's smaller scale and the company's focus on high-margin irrigation projects mean it won't derail the overall story.

Balance Sheet Strength and Dividend Stability

Lindsay's liquidity remains a standout feature, with $261 million in available cash and equivalents—up from $140 million in 2024—providing ample flexibility for reinvestment or shareholder returns. The dividend was raised to $0.36 per share quarterly, yielding 2.3%, well above peer averages. This combination of growth and income appeals to a broad investor base.

Catalysts for Sustained Growth

1. MENA Execution: The $20+ million project pipeline ensures visibility through 2026, while ongoing discussions with regional governments could unlock additional contracts.
2. U.S. Infrastructure Tailwinds: Federal spending on rural broadband and water infrastructure could boost demand for irrigation systems and parts.
3. Drought Resilience: Prolonged dry conditions in key agricultural regions are likely to sustain parts sales, even as new equipment orders lag.

Risks to Consider

• North America Softness: Farm income remains strained, and trade tensions could delay capital spending.
• Brazil Constraints: High interest rates (15% as of June 2025) may delay investments, though clarity on crop funding by July 2025 could alleviate this.
• Currency Fluctuations: MENA revenue is dollar-denominated, but emerging market volatility could impact margins.

Investment Thesis and Recommendation

Lindsay's exposure to global food security and recurring revenue models makes it a compelling play on structural growth. Near-term North American headwinds are manageable, given the company's liquidity and parts-driven resilience.

Buy Below $60: With shares trading near $65, a dip below $60 would offer an attractive entry. The dividend provides a cushion, while catalysts like MENA project execution and U.S. infrastructure wins could propel shares higher.

Hold for the Long Term: Investors should focus on Lindsay's decade-long track record of margin expansion and balance sheet discipline. With a conservative leverage ratio and $196 million in cash, the company is well-positioned to navigate cyclical cycles while capitalizing on secular trends.

In a world where water scarcity and food security are existential challenges, Lindsay's leadership in precision irrigation positions it as a critical player for years to come.