On Apr 26, we maintained our Neutral recommendation on
The Andersons Inc.
); 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; based on
expectations of growth opportunities through its recent
acquisitions, strong growth in the Rail Group, partially offset
by negative impact of the U.S drought on the grain and ethanol
businesses and continuing losses at the Ethanol and Retail
Andersons reported fourth-quarter 2012 earnings of $0.80 per
share, down 31% year over year while revenues increased 29% to
$1.7 billion. In 2012, Anderson posted earnings of $4.23 per
share, a year-over-year decline of 17% while revenues increased
15% to $5.3 billion.
In Dec 2012, Andersons completed the purchase of 12 grain
elevators and agronomy locations of Green Plains Grain Company to
diversify its grain and plant nutrient operations. With a
combined grain storage capacity of about 32 million bushels, this
will increase Andersons Grain Group's storage capacity by nearly
Andersons purchased all the assets of Mt. Pulaski Products,
LLC, which makes products from corn cobs in Oct 2012. The
acquisition will position Andersons as the sole leader of cob
processor as well as product manufacturer. Moreover, Andersons
raw corn cob supply will be doubled as the mills are best
positioned around the seed corn production areas in Ill. This is
in line with Andersons strategy of expanding its geographic
footprint into potential new markets and enhancing its product
portfolio to boost its revenues.
Andersons' Rail Group delivered significantly higher earnings
in 2012, driven by increased financing opportunities, higher
average railcar lease rates, larger railcar fleet and expansion
in the railcar repair business. The momentum is expected to
continue in 2013 as well based on above average financing
opportunities, strong recovery in lease rates, and expected
continued improvement in the repair business.
Drought conditions in the U.S encountered during the growing
season led to significantly lower corn yields. For this reason,
the drought had an unfavorable impact on space income for the
Grain business for the fourth quarter of 2012 and will likely
impact space income in the first half of 2013 as well.
The Ethanol Group incurred operating losses in 2012 due to
poor margins resulting from weak gasoline demand, an oversupply
of ethanol and high corn costs caused by the 2012 drought.
Andersons expects the first three quarters of 2013 to remain
challenging for the group due to regional corn shortages.
Furthermore, the Retail Group also continues to suffer losses due
to the weak economy. Stiff competition, especially from the mass
merchandisers and do-it-yourself home centers, has also added to
the segment's woes.
Other stocks to consider
Andersons currently retains a short-term Zacks Rank #3 (Hold).
Other stocks in the same industry with favorable Zacks rank are
CVR Partners, LP
Minerals Technologies Inc.
) with a Zacks Rank #2(Buy).
ANDERSONS INC (ANDE): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
MINERAL TECH (MTX): Free Stock Analysis
CVR PARTNERS LP (UAN): Free Stock Analysis
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