The Andersons Inc.
) tumbled 15% and closed at $52.60 on May 8, after the company
reported first-quarter 2014 results which were weaker than expected
due to lower grain prices and weak results in the Grain Group and
Plant Nutrient Group due to the severe weather. The company's
earnings per share increased 78% to 80 cents from 45 cents but
missed the Zacks Consensus Estimate of $1.02 by a margin of 22%.
Revenues in the reported quarter plunged 21% year over year to $1
billion. Results were way short of the Zacks Consensus Estimate of
Cost of sales fell 22% to $1.47 billion from $926 million in the
year-ago quarter. Gross profit declined 3% year over year to $77
million. Consequently, gross margin contracted 150 basis points
(bps) to 7.7% in the quarter.
Operating, administrative and general expenses went up 14% year
over year to $71 million. Operating profit went down 66% to $5.8
million. Thus, operating margin contracted 80 bps to 0.6% in the
The Grain Group: Revenues decreased 30% year over year to $583
billion due to lower grain prices, which decreased almost 30%.
Operating income increased 36% to $11 million.
The Ethanol Group: Revenues decreased 5% year over year to $189
million. The segment, however, reported a record operating income
of $19.8 million, a substantial improvement from $2.5 million
earned in the year-ago quarter. Improved performance of the ethanol
limited liability company investments, which benefited from strong
ethanol margins, mainly led to the year-over-year improvement.
Improved production rates, ongoing service fees, and increased
co-product sales of corn oil, E-85, and distillers dried grains
also contributed to the performance.
The Plant Nutrient Group: The segment reported revenues of $108
million, down 4% from the year-ago quarter due to weather-related
delays in fieldwork. The segment reported an operating loss of $1.4
million, worse than the loss of $0.6 million in the prior-year
quarter as a result of a slow start to the planting season.
The Rail Group: Revenues rose 13% year over year to $52 million.
Operating income increased 3% to $15 million from $14 million in
the year-ago quarter. The group benefited from higher lease rates
and increased income from car sales.
The Turf & Specialty Group: The segment posted revenues of $44
million, a 7% year-over-year decline. It reported an operating
profit of $1.4 million, a 66% drop from the year-ago quarter profit
of $4 million.
The Retail Group: Revenues in the segment decreased 10% year over
year to $27.6 million. Operating loss in the quarter was $2.3
million compared with the loss of $3.2 million in the prior-year
Andersons ended the first quarter with cash and cash equivalents of
$44 million, down substantially from $309 million as of 2013 end.
The long-term debt of the company decreased to $306 million as of
Mar 31, 2014 from $375 million as of Dec 31, 2013.
Debt-to-capitalization ratio was at 46% as of Mar 31, 2014 compared
with 37% as of Dec 31, 2013.
Andersons will continue to benefit from acquisitions in the past
year. 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.
The Ethanol and Rail groups have performed well in 2013 and in the
first quarter. The momentum is expected to continue in the balance
of 2014. The Ethanol Group worked diligently to increase its
production in the first quarter in contrast to other ethanol plants
which were forced to reduce production. The Rail Group's healthy
performance persists and it continues to increase both lease and
utilization rates over time. Even though the Plant Nutrient Group
was impacted by adverse weather in the first quarter, it is
expected to benefit from an anticipated significant corn crop
planting in the second quarter.
Maumee, OH-based Andersons is 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.
Among Andersons' peers,
) reported first-quarter adjusted loss per share of 12 cents as
against earnings of $1.15 in the year-ago quarter. Results fell way
short of the Zacks Consensus Estimate of $1.46.
Andersons currently carries a short-term Zacks Rank #2 (Buy).
Other stocks worth considering in the sector include
Wilmar International Limited
). Both the companies carry the same rank as Andersons.
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