LSI Industries, Inc. (LYTS:BUY) Q3:14 revenues and EPS below our expectations largely due to sales decline in Graphics segment.

29-APR-14 – LSI Industries, Inc. (LYTS:BUY) Q3:14 revenues and EPS below our expectations largely due to sales decline in Graphics segment. Strong LED growth during the quarter. Lowering FY:14 estimates, maintaining our price target of $11.00, and reiterate BUY rating.

Q3:14 HIGHLIGHTS

LYTS reported revenues of $69.0 million compared to Q3:13 revenues of $66.2 million, and below our estimate of $72.1 million.
Graphics segment revenues failed to materialize during the quarter due to the absence of orders from key retail clients.
Gross margin declined to 19.9% compared to 21.0% in Q3:13, and was below our estimate of 22.1%.
EPS was ($0.04) in Q3:14 compared to EPS of ($0.01) in Q3:13 and was below our estimate of $0.04.
We are lowering our FY:14 EPS estimate to $0.08 from $0.24 and lowering our FY:15 estimate to $0.36 from $0.42.
We maintain our BUY rating and our 12-month target price is maintained at $11.00. The current dividend yield is 3.0%.

RISKS

LYTS may experience volatility in its COGS from increased commodity and component costs, particularly steel, aluminum, light bulbs, fluorescent tubes, plastic, lenses, inks, and LEDs.
LYTS has traditionally focused on the gas station and convenience store markets for key customers which combined represents over 30% of total sales during Q3:14.