Andersons Upgraded to Strong Buy - Analyst Blog


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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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ADM , ANDE , GMK , UAN

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