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Analyst Blog

On Aug 19, 2014, shares of The Andersons, Inc. (ANDE - Analyst Report) soared to a new 52-week high of $65.62. The stock pulled back to end the trading session at $64.31 on that day. The stock price appreciation came on the back of upbeat second-quarter earnings.

Andersons has delivered a solid one-year return of about 46.8%, outperforming the S&P 500. Average volume of shares traded over the last three months is approximately 311K.

This Maumee, OH-based diversified company operates 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 with a market cap of $1.82 billion and long-term estimated earnings per share growth rate of 12%. The company has outperformed the Zacks Consensus Estimate in three of the four trailing quarters with an average surprise of 16.43%

What’s Driving Andersons Up?

Share price and estimates for Andersons have been on the rise since it reported its second-quarter earnings on Aug 6. Record operating performance in the Ethanol Group and improved performance in the Grain Group and Plant Nutrient Groups were instrumental in a 49% increase in earnings to $1.56 per share, beating the Zacks Consensus Estimate of $1.15 by a wide margin of 36%.

The Ethanol group performed well in 2013 and also in the first half of 2014. The momentum is expected to continue in the balance of 2014. Even though the Plant Nutrient Group was impacted by adverse weather in the first quarter, volume was up approximately 6% during the first half of the year, regaining all of the first-quarter volume reduction. It is expected to benefit from an anticipated significant corn crop planting in the second quarter. As of second-quarter end, the Rail Group's utilization rate was 89.1%, up from 86.1% in the prior year and is expected to increase in the back half of the year.

Moreover, Andersons will continue to benefit from acquisitions made in the past year. 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.

The Zacks Consensus Estimate for 2014 reflects an estimated 31% jump to $4.17 from $3.18 earned in 2013. For 2015, the bottom line is expected to witness 7.9% year-over-year growth to $4.50.

Andersons is a Zacks Rank #1 (Strong Buy) stock. Other companies in the sector worth considering include Gruma S.A.B. de CV (GMK - Snapshot Report), Adecoagro S.A. (AGRO - Snapshot Report) and Fresh Del Monte Produce Inc. (FDP - Snapshot Report). While Gruma S.A.B. de CV carries the same rank as Andersons, Adecoagro and Fresh Del Monte Produce carry a Zacks Rank #2 (Buy).

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