On Feb 6, we downgraded our recommendation on
The Andersons Inc.
) from Outperform to Neutral. It is a diversified company with
operations ranging from buying, selling and storing grain to
leasing railcars and running retail stores catering to the latest
home hardware needs.
Concerns regarding the outlook of the domestic ethanol,
significant decline in fertilizer volumes and higher expenses in
the car business offset benefits from its proficiently managed
railcar portfolio, record corn crop and acquisitions led to the
Andersons reported third-quarter 2013 earnings of 91 cents per
share, up 1% year over year. Revenues in the reported quarter
rose 4% year over year to $1.18 billion.
Andersons' Rail Group continues to benefit from increased
financing opportunities, higher railcar lease rates, larger
railcar fleet and expansion of the railcar repair business. The
acquisition of railcar repair and cleaning provider, Mile Rail is
expected to increase Andersons' railcar repair revenues by 25%.
The outlook for the Grain segment remains strong on the back of a
record corn crop along with improving global demand. Due to
drastically reduced 2012 harvest brought about by drought
conditions, global inventory levels across major crop commodities
are low. The record crop will drive a rebound in grain storage
and handling volumes and Andersons will benefit from the wave of
Andersons' strategy is to grow its grain business that entails
geographic expansion, expansion of existing facilities,
acquisitions and grain-handling agreements. In July, Andersons
completed the acquisition of Ontario-based Thompsons Limited, a
grain and food-grade bean handler and agronomy input
Andersons added 12 elevators, 11 retail farm centers, 2 seed
processing plants, five bean processing plants and a wheat
processing plant. Thompsons had a total grain storage capacity
(owned and leased) of 20 million bushels and 30,000 tons of
nutrient capacity. The deal is expected to be accretive to
full-year 2014 earnings.
ANDERSONS INC (ANDE): Free Stock Analysis
AMIRA NATURE FD (ANFI): Free Stock Analysis
CALAVO GROWERS (CVGW): Free Stock Analysis
GRUMA SA-ADR B (GMK): Free Stock Analysis
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On the flipside, The Turf & Specialty group's performance
will be negatively impacted by the car business, which will incur
higher expenses than usual, as it continues to invest in
operational and safety improvements at the Mt. Pulaski facility
acquired last year.
The Plant Nutrient Group segment reported an operating loss in
the quarter due to a significant decline in fertilizer volumes.
Volume for the period was lower than anticipated due to later
harvest this year compared with the prior year, which proved to
be unfavorable for early third-quarter nutrient application.
Even though margins improved in the ethanol business, the company
cautions that the ethanol market will continue to be volatile.
According to reports, the U.S. Environmental Protection Agency
(EPA) is considering a reduction in the amount of ethanol
required to be blended with gasoline in 2014. If the proposed
reduction is adopted, it would affect ethanol producers like
Other Stocks to Consider
Andersons currently retains a short-term Zacks Rank #3
(Hold). Some better-ranked stocks in the sector include
Gruma S.A.B. de CV
Amira Nature Foods Ltd.
Calavo Growers Inc.
). While Gruma S.A.B. de CV holds a Zacks Rank #1 (Strong Buy),
Amira Nature Foods and Calavo Growers hold a Zacks Rank #2