These 2 Machinery Stocks will Shine in 2013: Manitowoc Company, Inc. (MTW), Joy Global Inc. (JOY), Lindsay Corporation (LNN)

Lindsay Corporation (NYSE:LNN)

Lindsay reported fiscal year 2013 first quarter revenue of $147 million, an year-over-year increase of 24%, and EPS of $1.15 as compared to $0.23 in the previous year. The results were driven by increase in irrigation equipment margins, fixed cost leverage on higher sales, and due to farmers’ prediction of dry weather which increased acreage planting. This, in-turn, increased farmers’ spending on purchasing new irrigation equipment. Total irrigation equipment revenue increased 33% year-on-year to $134.2 million.

Domestic corn planting has increased in the past three years in order to fulfill increasing demand, and because of supply issues due to undependable weather. However, moving forward, the various market fluctuations such as slowdown in demand, and falling corn prices will affect Lindsay Corporation (NYSE:LNN)’s profitability. Falling corn prices directly imply less income for the farmers, and as a result, less spending on equipment.

Moreover, record spending on irrigation equipment in the last two years has led to a market saturation point. I expect farmers’ income to remain flat this year, and to further fall in 2014. Based on these economic dynamics, I believe the farming cap-ex will also remain flat in 2013, resulting in the company’s irrigation sales to decrease by around 1.5%.

Even after posting good quarterly results, the prospects of Lindsay Corporation (NYSE:LNN) do not attract me. Factors such as falling corn prices and a saturating market for irrigation equipment will limit the growth of the company in 2013.

Conclusion

To sum up, I feel both Manitowoc and Joy Global Inc. (NYSE:JOY) are well-placed in the industry to benefit from improving fundamentals. Manitowoc Company, Inc. (NYSE:MTW)will be benefited from its focus on expanding cranes margins and substantial debt reduction. Similarly, Joy will get the advantage of its after-market segment, along with increased exposure in China. I recommend a buy for both these stocks.

On the other hand, unfavorable economic conditions will affect the sales of Lindsay Corporation (NYSE:LNN), which can hurt returns to investors. My view on this stock is neutral.

The article These 2 Machinery Stocks will Shine in 2013 originally appeared on Fool.com and is written by Shweta Dubey.

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