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Bear of the Day: The Andersons (ANDE)

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The Andersons, Inc. (ANDE - Free Report) is struggling to find the right mix in the agribusiness sector. This Zacks Rank #5 (Strong Sell) has closed its retail stores as part of its turnaround strategy.

The Andersons was founded in 1947 by Harold Anderson in Maumee, Ohio with a single grain elevator. It has grown into an agribusiness company with numerous business segments across North America, including in grain, ethanol, plant nutrient and rail.

End of an Era as Andersons General Stores Close

On June 3, The Andersons closed its 4 remaining Andersons General Stores, which were located in Columbus and Toledo, Ohio.

It was a bittersweet moment for many in Ohio as the first store opened in 1952 and employed 1050, although 75% of those were part-time workers.

The retail stores were a legacy of the original founder but the stores could not compete with Home Depot, Lowe's, Tractor Supply and others in the same space as retail became more competitive.

The retail segment had lost $20 million over the past 8 years. It never recovered from the Great Recession as it hadn't made annual profit since 2008.

But this means it can focus on areas it does well, including its grain and rails businesses.

Met the Estimate in the First Quarter

On May 3, The Andersons reported first quarter results and met the Zacks Consensus Estimate of $0.07.

Three of its 4 business segments saw better year-over-year results.

In addition to getting rid of its retail operations, it sold some underperforming Nutrient Group assets in Florida in the quarter.

In good news, it acquired a small specialty grain handling and milling business that will boost its food ingredient capabilities.

The Plant Nutrient and Rail segments had weak quarters but it looks like market conditions might be bottoming.

In nutrients, low prices due to oversupply are expected to persist but should start to improve in 2018. Demand remains strong.

In the rails, North American rail traffic improved year-over-year but volumes remained historically low. However, the company believes that the rails are in the later stages of a cyclical market downturn.

Estimates Cut

The analysts are still pessimistic on the changes being made, at least for 2017.

The 2017 Zacks Consensus Estimate fell to $1.75 from $2.22 just 90 days ago. However, 2018 looks a little better with the consensus at $2.35.

Shares Fall From 1-Year Highs

Shares of The Andersons have fallen since the company announced in early January 2017 that it was closing its retail operations.

However, they're still not that cheap. It trades with a forward P/E of 19.7.

Shareholders do get a dividend, currently yielding 1.9% for their patience.

If you're looking for an agribusiness company with a better Rank, you might want to consider Syngenta . It's a Zacks Rank #1 (Strong Buy).

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