Bull of the Day: The Andersons (ANDE) - Bull of the Day
November 13 2013 - 6:33AM
Zacks
Diversification is paying off for
The Andersons, Inc. (ANDE)
as it posted a huge earnings beat in the third quarter on the
strength of its rail and grain segments. This Zacks Rank #1 (Strong
Buy) is expected to have double digit earnings growth in 2014.
The Andersons was founded in 1947 in Ohio.
Originally a single grain elevator and truck terminal, it has grown
into an agribusiness company with 6 business segments, including
grains, ethanol, fertilizers, and turf.
It also has rail equipment leasing interests in
Canada and Mexico where it repairs and manages 23,000 railcars and
operates 4 stores in Toledo and Columbus, Ohio focusing on home
goods.
For several years, The Andersons had been riding
the fertilizer wave as fertilizer prices and demand soared to new
highs. But in 2013, that story ended. For the pure fertilizer
players, that meant earnings were pressured.
But The Andersons is more than just a fertilizer
play.
50% Beat in the Third Quarter
On Nov 6, The Andersons reported its third quarter
results and beat the Zacks Consensus by $0.30. Earnings were $0.91
compared to the consensus of $0.61.
The Ethanol Group saw a record operating income of
$10.9 million on revenue of $213 million. It saw a loss of $0.9
million in the year ago quarter.
The Rail and Grain Groups were also strong which
offset weakness in the Plant Nutrient Group which saw an operating
loss of $1.6 million. Margins were still solid but volume was down
significantly due to lower price trends and increased volatility in
the fertilizer market.
The Andersons believes some of the volume might be
regained in the fourth quarter.
The company is still optimistic about the fourth
quarter. It believes the quarter will be similar to those in 2010
and 2011, and not in 2012 when drought conditions hammered the
farmers.
Analysts Raise Full Year Estimates
The Andersons is one of the rare agribusiness
companies where the analysts are actually raising, instead of
lowering, full year estimates.
3 estimates were raised since the earnings report
for 2013 and 2 estimates were raised for 2014. The 2014 Zacks
Consensus Estimate jumped to $5.54 from $5.37 in the last week.
That is earnings growth of 24%.
Shares Near 2-Year High
Shares have been on a tear the last 2 years,
hitting a new multi-year high on its big earnings beat.
But valuations are still reasonable. It trades with
a forward P/E of 18, which is a little higher than the overall
S&P 500 at 16.5x but it has a price-to-book of 2.2 and a
price-to-sales ratio of only 0.3. A P/S under 1.0 usually means a
company is undervalued.
At a time when the agribusiness companies are out
of favor with investors, The Andersons is bucking that trend
through its diverse business units.
Investors interested in agribusiness would be wise
to keep The Andersons on their short list.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com.
She is also the Editor of the Turnaround Trader and Value Investor
services. You can follow her on twitter at @TraceyRyniec.
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