The Andersons, Inc.
(ANDE - Analyst Report
) had a record 2011 as the agriculture sector remained hot. Can this Zacks #1 Rank (Strong Buy) repeat in 2012? The stock is getting no love from investors. It is cheap, with a forward P/E of just 9.4.
The Andersons (yes, that's really the company's real name), was founded in 1947 by Harold Anderson in Ohio.
Originally a single grain elevator and truck terminal, it has grown into an agribusiness company 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 20.6% in Q4
On Feb 8, The Andersons reported its fourth quarter and full year results and blew by the Zacks Consensus for the quarter by 20 cents. Earnings per share were $1.17 compared to the consensus of just 97 cents.
Revenue rose to $1.3 billion from $1.2 billion last year based mainly on rising prices in the agriculture businesses.
The fourth quarter capped quite a year for the company with record earnings of $5.09 per share, blowing away the prior record of $3.76 per share in 2007 when fertilizer prices were soaring.
The Grain and Plant Nutrient Group (aka fertilizers), once again led the quarter with record income.
The Grain Group saw revenue jump 47% to $2.8 billion from $1.9 billion a year ago. Revenue at the Plant Nutrient Group rose to $691 million from $619 million.
The Rail Group, which is a smaller segment, continued to see significant improvement. The average utilization rate for 2011 rose to 84.6% from 73.6% last year. Revenue jumped 12% to $107 million from $95 million in 2010.
Analysts Cautious on 2012
The Andersons didn't give any 2012 guidance it its press release but it did sound cautious on the conference call. While the agriculture sector should remain strong, a repeat of a record year like 2011 probably isn't in the cards.
The analysts see earnings falling 11% in 2011 even as the Zacks Consensus Estimate rose to $4.53 from $4.47 in the last week. Remember, the company made $5.09 in 2011.
The Andersons Is a Cheap Stock
Even with the solid earnings report, the shares aren't getting any love. Investors are nervous about the outlook for the agriculture sector in 2012, especially the fertilizer segment.
Shares have been trading in a narrow range for the last year.
However, that makes The Andersons very cheap.
In addition to a forward P/E under 10, it also has a price-to-book ratio of 1.5. I use a P/B ratio under 3.0 to determine if there's value.
The company also has a really low price-to-sales ratio of 0.2. A P/S under 1.0 usually indicates a company is undervalued and this P/S is well below that.
Its other fundamentals are also solid, with a 1-year return on equity (ROE) of 18.3, well above the S&P 500's average of 13.6%.
Shareholders are also rewarded with a dividend, currently yielding 1.4%.
2012 looks to be a transitional year for the agriculture sector after years of a strong market.
However, the agribusiness companies like The Andersons have solid value fundamentals. For value investors looking to invest in the agriculture sector, it may be time to start stocking up.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.