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Why Is The Andersons (ANDE) Down 2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for The Andersons, Inc.ANDE . Shares have lost about 2% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ANDE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Andersons Q4 Earnings Top Despite Tough Markets

Andersons' fourth-quarter 2017 adjusted earnings surged around 72% year over year to 62 cents per share. Earnings also beat the Zacks Consensus Estimate of 38 cents per share by a wide margin of 63%.

Including one-time items, Andersons posted earnings of $2.42 per share in the quarter compared to 36 cents reported in the year-ago quarter. Reported quarterly earnings include income-tax benefit associated with the December tax reform, goodwill-impairment charge in the Plant Nutrient Group and impairment charges associated with the Grain Group's Tennessee facilities. However, the year-ago quarter did not include any adjustments.

Operational Update

Revenues in the reported quarter slipped around 9.8% year over year to $1,004 million. Difficult market conditions impacted the results. Cost of sales fell 8.9% to $919 million from $1,009 million recorded in the prior-year quarter. Gross profit dropped 18% year over year to $84.8 million. Consequently, gross margin contracted 90 basis points to 8.4% in the quarter.

Operating, administrative and general expenses were down 20% year over year to $67.6 million. Andersons' adjusted operating profit of $17.2 million in the fourth quarter decreased 9.6% from $19.1 million recorded in the year-earlier quarter. Operating margin remained flat year over year at 1.7% in the quarter.

Segment Performance

The Grain Group: Revenues improved 13.9% year over year to $641.9 million from $745.2 million generated in the year-earlier quarter. The segment reported an operating income of $8.3 million compared with $12.9 million posted in the comparable quarter last year.

The Ethanol Group: Revenues jumped 18% year over year to $174.5 million. The segment reported an operating profit of $6.4 million, considerably down from $11.7 million recorded in the year-ago quarter.

The Plant Nutrient Group: The segment reported revenues of $136.9 million, up a marginal 0.4% year over year. It reported an operating loss of $18 million compared to a loss of $3.8 million witnessed in fourth-quarter 2016.

The Rail Group: Revenues at this segment went up 11% year over year to $50.5 million. Operating income plunged 30.8% to $6.7 million from $9.7 million recorded in the prior-year quarter.

Retail Group: Revenues tanked significantly to $0.3 million from $38.1 million generated in the year-ago quarter. The segment reported an operating profit of $1.8 million compared with a loss of $6.2 million in the year-earlier quarter.

2017 Performance

Andersons reported adjusted earnings per share of $1.15 in 2017, up a massive 180% year over year. Earnings also beat the Zacks Consensus Estimate of 89 cents. On a reported basis, the company posted earnings of $1.46 per share compared to 41 cents recorded in 2016.

Revenues for the year dropped 6% year over year to $3,686 million from $3,924 million recorded in 2016.

Financial Performance

Andersons reported cash and cash equivalents of $34.9 million at the end of fourth-quarter 2017, significantly down from $62.6 million reported at the end of 2016. Long-term debt was $418 million as of Dec 31, 2017, compared with $397 million as of Dec 31, 2016.

Andersons has signed an agreement to sell its grain elevators in Humboldt, Kenton, and Dyer, TN, to a subsidiary of Tyson Foods, Inc. Andersons owns three additional elevators in Tennessee which are not part of the purchase agreement with Tyson. The transaction is scheduled to close next month.

The company recorded a significant one-time income-tax benefit of $74.2 million in 2017, primarily related to the recent tax reform. Andersons anticipates to benefit from a substantial decrease in its effective tax rate in 2018.

Andersons expects its Rail Group will gain from the company's continued focus on the expansion of diverse lease and car portfolio and repair network. Nevertheless, its Plant Nutrient Group's wholesale fertilizer business will continue to be challenged by supply and demand imbalance.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

The Andersons, Inc. Price and Consensus

The Andersons, Inc. Price and Consensus | The Andersons, Inc. Quote

VGM Scores

At this time, ANDE has a poor Growth Score of F. However, its Momentum is doing a lot better with a B. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise ANDE has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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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 Nasdaq, Inc.


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

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