The Andersons, Inc. (ANDE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We are downgrading our recommendation on Andersons from neutral to underperform with a target price of $42 as its estimates have undergone negative revisions following its third-quarter results. Andersons' earnings in the third quarter of 2014 declined 3% year over year to $0.59 per share. Revenues also plunged 19% year over year to $952 million. Andersons' earnings per share will be reduced by $0.25 to $0.35 in 2015, relative to 2014, due to higher project expense related to the roll out of the new SAP Financial system. Further, Andersons' growth will be hurt by recent decline in the value of distillers dried grains due to Chinese import restrictions. In addition, poor railroad service, increased competition and volatility in raw material price remain headwinds for the company in the near term.


Overview:

Founded in 1947 in Maumee, Ohio, The Andersons, Inc. (ANDE) 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. The company has operations across the U.S. and in Puerto Rico, plus rail equipment leasing interests in Canada and Mexico.

The Grain Group (60% of total revenue in third quarter of 2014) operates grain elevator facilities in the U.S. Corn Belt. In addition to storage, merchandising and grain trading, the Grain group provides marketing, risk management, and corn origination services to its customers and affiliated ethanol production facilities. Grain is a significant investor in Lansing Trade Group, LLC (LTG), an established commodity trading, grain handling and merchandising business, with operations across the country and global trading/merchandising offices.

The Ethanol Group (19%) has ownership interests in ethanol production facilities organized as separate limited liability companies. The plants are located in Iowa, Ind., Mich., and Ohio, with a combined capacity of 330 million gallons of ethanol. The business purchases and sells ethanol, offers facility operations, risk management, and ethanol, corn oil and distillers dried grains marketing to the ethanol plants where it invests and operates, as well as to third parties.

The Plant Nutrient Group (12%) manufactures and distributes agricultural and related plant nutrients and pelleted lime and gypsum products in the U.S. Corn Belt, Florida and Puerto Rico. The Group provides warehousing, packaging, and manufacturing services to basic nutrient manufacturers and other distributors.

The Retail Group (4%) operates retail stores under the name "The Andersons" in the cities of Columbus and Toledo in Ohio, and also a specialty food store under the name "The Andersons Market" in the same state. The retail store provides home improvement products and other mass merchandise categories as well as specialty foods, wine, and indoor and outdoor garden centers. The specialty food store includes fresh product offerings like produce, deli, bakery items and fresh meat, specialty and conventional dry goods, and wine.

The Rail Group (3%) repairs, sells and leases a fleet of over 23,000 railcars and locomotives of various types, as well as a small number of containers. The group has a diversified fleet of car types (boxcars, gondolas, covered and open top hoppers, tank cars and pressure differential cars), locomotives, and containers. The Group mainly operates in the used car market by purchasing used cars, and repairing and refurbishing them for specific markets and customers.

The Turf and Specialty Group (2%) produces and markets turf and ornamental plant fertilizer products and control products for use in lawns and gardens, and professional golf and landscaping industries, as well as corncob based products to the pet and the industrial markets. Professional turf products are sold directly and through distributors to golf courses.


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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 , Stocks

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