The Andersons, Inc. (ANDE - Analyst Report) is cashing in on record farming income as the agribusiness company recently reported record first quarter results. This Zacks #2 Rank (Buy) has both value and growth with a PEG ratio of only 0.9.
The Andersons was founded in 1947 by, of course, Harold Anderson in Ohio.
Originally a single grain elevator, it has grown into an agribusiness company, including fertilizer and grain businesses, with 5 business segments in 16 states and Puerto Rico. It also has rail equipment leasing interests in Canada and Mexico.
The Andersons Beat By 26% in Q1
On May 4, The Andersons reported its first quarter results and did not disappoint, easily surprising on the Zacks Consensus Estimate by 19 cents. Earnings per share were a record 93 cents compared to the consensus of 74 cents. It made just 66 cents in the year ago period.
Sales jumped 39% to $1 billion form $722 million in the year ago quarter.
The Plant Nutrient Group, which is the fertilizer segment, saw the largest year over year gain as revenue jumped to $124 million from $103 million mainly due to higher average selling price per ton. Volume was basically unchanged from a year ago.
The Grain Division was also strong with revenue rising to $638 million from $402 million in the first quarter of 2010 due to a climb in grain prices.
The Rail Group was also a surprise in the quarter. This segment had not really seen much of a recovery from the recession but in the first quarter the average utilization rate jumped to 82% from 70% a year ago. Revenue also rose $2 million to $29 million.
Zacks Consensus Estimate Rises for 2011 and 2012
The Andersons didn't give earnings guidance but analysts liked what they heard in the first quarter.
In the last month, the 2011 Zacks Consensus Estimate jumped to $4.05 from $3.94 per share.
This is earnings growth of 16.38%.
Analysts are a little more cautious on 2012 but are still predicting earnings growth of about 3%.
You can see that earnings growth has smoothed out considerably since the last agriculture commodities boom (and then bust) in 2008 and 2009. It has been steady year over year growth since.
The Andersons Is a Value Stock
The Andersons is trading with a forward P/E of just 10.5 which is cheap compared to the S&P 500 average which is 13.8x and also compared to its larger competitors like Bunge (BG), which trades at 11.5x.
The company also has other value characteristics including a price-to-book ratio of 1.6, which is well under the 3.0 cut-off I use for "value" stocks.
Its price-to-sales ratio is also only 0.2. Again, a P/S ratio under 1.0 normally indicates "value."
Additionally, the company has a 1-year return on equity (ROE) of 15.2%. It also rewards shareholders with a dividend currently yielding 1.1%.
The Magic Combination of Growth AND Value
With The Andersons, you're getting earnings growth off of the hot grain and fertilizer markets along with a P/E of just 10.5. The Andersons has the "magic combination" of both growth and value with a PEG of 0.9. A ratio under 1.0 indicates a company is undervalued.
This Week's Value Zacks Rank Buy Stocks
CNH Global N.V. (CNH) is cashing in on record farming income. This Zacks #1 Rank (strong buy) saw sales rise 17% in the first quarter. It also has solid valuations, with a forward P/E of 14.7. Read the full article.
The recent sell-off in silver has created a buying opportunity in the silver miners. Pan American Silver Corporation (PAAS) recently reported record quarterly earnings. This Zacks #1 Rank (strong buy) is cheap, at just 12.7x forward estimates. Read the full article.
The specialty chemical companies have pricing power. Kraton Performance Polymers, Inc. (KRA) saw revenue surge 26% in the first quarter as both prices and volumes rose. This Zacks #1 Rank (strong buy) is cheap with a forward P/E of 9. Read the full article.
Want to get in on the agriculture boom? Think fertilizers. CF Industries Holdings Inc. (CF) recently reported record earnings in the first quarter yet shares are dirt cheap. This Zacks #1 Rank (strong buy) is trading near a 52-week high yet has a forward P/E of just 9.4. Read the full article.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.