Record 2011 EPS at The Andersons

The Andersons Inc. (ANDE - Analyst Report) reported fourth quarter EPS of $1.17, a 16% decline from $1.39 reported in the year-ago quarter but way ahead of the Zacks Consensus Estimate of 97 cents.

Total revenue in the quarter was $1,298 million, up 12% from $1,154 million in the prior-year quarter, outperforming the Zacks Consensus Estimate of $1,280 million. The year-over-year improvement was primarily driven by higher sales across the company’s segments besides price increases in the company's agricultural businesses.

Gross profit increased 5% year over year to $86.4 million whereas gross margin dipped 40 basis points to 6.7%. Operating income plunged 31% to $23.2 million from $33.8 million in the year-ago quarter. Operating margin in the quarter was 1.8% compared with 2.9% in the year-ago quarter.

Segmental Performance

Grain: Segment sales increased to $875 million from $784 million in the year-earlier quarter. Operating income however dropped to $27.3 million from $35.6 million in the 2010 quarter.

Ethanol: The segment reported revenues of $165 million, up from $127 million in the prior-year quarter due to higher ethanol prices. The segment’s operating income doubled to $6million.

Plant Nutrient: Segment sales were $169 million versus $159 million in the prior-year quarter. Operating profit was $2.4 million compared with $8.9 million in the year-ago quarter.

Rail: The segment’s sales increased to $25 million from $22 million in the year-earlier quarter. The segment reported an operating income of $2.3 million reversing the year-ago quarter’s loss of $1.1 million.

Turf & Specialty: Total sales inched up 2% to $17.8 million from the year-ago quarter. The segment reported an operating loss of $1.8 million compared with a loss of $1.4 million in the year-earlier quarter.

Retail: Sales in the segment improved 5% to $45 million and the segment reported an operating profit of $0.5 million compared with the year-ago loss of $0.13 million.

Fiscal 2011 Performance

For fiscal 2011, Andersons reported a record EPS of $5.09, a 46% year-over-year climb, ahead of the Zacks Consensus Estimate of $4.92. Revenues clocked $4.576 billion, up 35% year over year but falling short of the Zacks Consensus Estimate of $4.8 billion. Escalating prices in the agricultural businesses were mainly instrumental for the upside.

Financial Position

Cash and cash equivalents increased to $20.4 million as of December 31, 2011, down from $29.2 million as of December 31, 2010. Long-term debt stood at $238 million as of December 31, 2011 compared with $279 million as of June 30, 2011.

The majority of the company’s revenues are derived from the Grain & Ethanol group. Therefore, the company undertakes constant efforts to upgrade the business and strengthen its market position in the face of growing competition.

In 2011, the company added 1.7 million bushels of grain storage capacity and began construction on a grain shuttle loader facility in Nebraska. Andersons also acquired two businesses in the Plant Nutrient Group – Immokalee Farmer Supply and New Eezy Gro – which will help augment the customer base.

However, the impact of the generally weak economy on the company’s Retail group segment remains a concern. Not only is Andersons witnessing a decline in the customer count, it is generating lower average sales per customer, given the cuts in discretionary spending. Stiff competition, especially from mass merchandisers and do-it-yourself home centers, has also added to the company’s concerns.

Based in Maumee, Ohio, The Andersons, which has a Zacks #2 Rank (Buy rating), is a diversified company operating in five 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.

Andersons competes with Archer Daniels Midland Company (ADM - Analyst Report), CHS Inc. (CHSCP) and privately held Cargill, Inc.

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Read the full analyst report on CHSCP