Andersons Upgraded to Strong Buy - Analyst Blog
April 14 2014 - 4:00PM
Zacks
On Apr 12, Zacks Investment
Research upgraded The Andersons Inc. (ANDE), a
diversified company operating in six different business segments
ranging from buying, selling and storing grain to leasing railcars
and running retail stores catering to the latest home hardware
needs, to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
The share price and earnings estimates of Andersons have been
trending upward, following its record fourth-quarter 2013 results
on Feb 12. Adjusted earnings moved up an impressive 104% to $1.08
from 53 cents (adjusted to reflect the company's Feb 2014
three-for-two stock split) earned in the year-ago quarter. Results
beat the Zacks Consensus Estimate of $1.05, delivering a positive
earnings surprise of 2.86%, the third straight quarter of a
positive earnings surprise.
For full-year 2013, Andersons reported earnings per share of $3.18,
up 12.7% from $2.82 (adjusted to reflect the company's Feb 2014
three-for-two stock split) in 2012. Segment wise, the Ethanol Group
had record operating income in 2013 and a best ever fourth quarter,
reversing the loss incurred in the prior-year comparable period,
attributed to strong ethanol margins. The Rail Group was close to
the record 2012 results. The Turf and Specialty Group had a record
year, with more than double the prior-year results. Despite
unfavorable impacts of the 2012 drought, the Grain Group performed
well, helped by strong earnings of the Lansing Trade Group.
Andersons will benefit from its activities on the acquisition front
in 2013. The acquisition of Blenheim, Ontario-based Thompsons Ltd.,
a grain and food-grade bean handler and Mile Rail, LLC, a provider
of agronomy input as well as railcar repair and cleaning equipment
will be accretive to earnings for full-year 2014. In December,
Andersons finalized the acquisition of the granulation
manufacturer, Cycle Group, Inc. The company purchased the assets of
Cycle Group to geographically expand the Turf & Specialty
Group's granulation business. In addition, the acquisition will
increase the company’s production and distribution capabilities in
the high-value markets of the granular business and help to serve
customers better.
The Agricultural Group is expected to benefit from the record corn
crop seen in 2013 and the anticipated sizable corn crop in 2014.
The Rail, Grain and Plant and Nutrients Groups are also expected to
perform well. Though margins have improved in the ethanol business,
the company remains cautious as the ethanol market will continue to
be volatile. In addition, Andersons’ stock split and dividend
distribution program will drive growth in the future.
Over the last 60 days, the Zacks Consensus Estimate for 2014 has
gone up 5% to $4.00 per share as all of the 4 estimates have moved
upward. Over the same time frame, the Zacks Consensus Estimate for
2015 has gone up 2.3% to $4.01 per share as 2 out of 3 estimates
have been revised upward.
Other Stocks to Consider
Some other stocks worth considering in the sector include
Gruma S.A.B. de CV (GMK), Archer Daniels
Midland Company (ADM) and CVR Partners,
LP (UAN), all of which carry a Zacks Rank #2 (Buy).
ARCHER DANIELS (ADM): Free Stock Analysis Report
ANDERSONS INC (ANDE): Free Stock Analysis Report
GRUMA SA-ADR B (GMK): Free Stock Analysis Report
CVR PARTNERS LP (UAN): Free Stock Analysis Report
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