UPDATE 2-LSI Industries posts Q2 surprise loss; shares down

* Q2 loss $0.01/shr vs EPS $0.02 estimate

* Graphics segment sales fall 56 pct

* Reaffirms FY09 outlook view

* Shares fall 17 pct (Adds analysts' comments, share movement)

By Bhaswati Mukhopadhyay

BANGALORE, Jan 22 (Reuters) - Lighting products maker LSI Industries Inc (LYTS.O) posted a surprise second-quarter loss, hurt by a sharp fall in sales at its graphics segment, sending its shares down as much as 17 percent.

"Sales continued to soften as the recessionary pressures had more of an effect on the economy, particularly our automotive and retail markets," Chief Executive Robert Ready said in a statement.

But LSI Industries, which offers LED (light-emitting diode) billboards to custom LED video displays, reaffirmed its 2009 outlook.

Canaccord Adams analyst Jonathan Dorsheimer said a company conference call, scheduled for Friday morning, could provide more information on what basis LSI Industries reaffirmed its outlook even amid a recession.

Dorsheimer sees negative trends in all of LSI Industries' end-markets -- graphics and rebranding, digital signage and billboards.

Sales in the company's graphics segment, which Dorsheimer says contributes a third of its revenue, fell 56 percent to $15.5 million in the second quarter. Lighting segment sales were down 7 percent in the period.

"They will need to generate some orders to begin building backlog in the business again," James Ricchiuti, an analyst at Needham & Co, said.

Canaccord Adams' Dorsheimer said there needs to be more merger-and-acquisition activity for LSI Industries' prospects to grow. When companies merge, they may want to rebrand themselves by revamping their logo and using different signage.

"Lack of M&A activity is making it difficult for LSI Industries' graphics business to grow," Dorsheimer, who has a "hold" rating on the stock, said.

LSI Industries, whose key competitors are Cooper Industries Ltd (CBE.N), Hubbell Inc (HUBa.N) (HUBb.N) and Acuity Brands Inc (AYI.N), reported a second-quarter net loss of $13.1 million, compared with net income of $4.8 million a year earlier.

Excluding goodwill impairment, the company posted a loss of 1 cent a share.Analysts on average had expected a profit of 2 cents per share, before items, according to Reuters Estimates.