The Andersons Inc. (ANDE) reported fourth-quarter 2014 adjusted earnings of 89 cents per share, declining around 17.6% from $1.08 per share earned in the year-ago quarter. Earnings missed the Zacks Consensus Estimate of $1.12, a negative surprise of 20.5%.
Operational Update
Revenues in the reported quarter plunged 19.7% year over year to $1.27 billion. Results fell short of the Zacks Consensus Estimate of $1.44 billion by a wide margin. Volume for the Plant Nutrient Group was down approximately 19% due to a late harvest and poor weather conditions.
Cost of sales fell 21.5% to $1.16 billion from $1.47 billion in the year-ago quarter. Gross profit increased 4% year over year to $114 million. This led to a 200 basis point expansion in gross margin to 9% in the quarter.
Operating, administrative and general expenses went up 10.6% year over year to $94.9 million. Adjusted net income decreased 15.6% year over year to $25.9 million. Operating profit decreased 20% to $19 million. Operating margin remained flat year over year at 1.5% in the quarter.
Segment Performance
The Grain Group: Revenues decreased 22.8% year over year to $867.5 million. Operating income increased 8.6% to $24 million from $22 million in the year-ago quarter.
The Ethanol Group: Revenues decreased 13% year over year to $171 million. The segment reported operating income of $19.4 million, tumbling 36.7% from $30.6 million in the year-ago quarter.
The Plant Nutrient Group: The segment reported revenues of $137.8 million, down 19% year over year. The segment reported an operating income of $0.4 million, which plunged around 94% from $6.2 million in the year-ago quarter.
The Rail Group: Revenues declined 3.4% year over year to $31 million. Operating income decreased 10% to $5.6 million from $6.2 million in the year-ago quarter.
The Turf & Specialty Group: The segment posted revenues of $24.9 million, increasing 10.6% year over year. It reported an operating income of $0.2 million, reversing from the year-ago quarter’s loss of $1.4 million.
The Retail Group: Revenues in the segment increased 4.3% year over year to $39 million. Operating income in the quarter was $1.04 million, contrary to the loss of $3.9 million in the prior-year quarter.
Financial Performance
Andersons had cash and cash equivalents of $114.7 million at the end of 2014 compared with $309 million at 2013-end. Long-term debt was $298.6 million as of Dec 31, 2014 versus $375 million as of Dec 31, 2013. Debt-to-capitalization ratio was at 31% as of Dec 30, 2014 compared with 37% as of Dec 31, 2013.
On Dec 17, 2014, Andersons’ board approved a 27.3% increase in regular quarterly dividend to 14 cents per share from 11 cents.
2014 Performance
Andersons posted record adjusted earnings of $3.46 per share for 2014, which increased an impressive 8.8% year over year. However, it missed the Zacks Consensus Estimate of $4.07 per share. Including special items, earnings were $3.84 per share for the year compared with $3.18 in 2013.
Revenues for the full year decreased 19% year over year to $4.54 billion from $5.6 billion in 2013 due to lower commodity prices. Revenues also lagged the Zacks Consensus Estimate of $4.71 billion.
2015 Outlook
Andersons’ strong fundamentals will benefit its core businesses in 2015. Higher gasoline demand, improved demand and prices for distillers dried grains in relation to corn price, ample corn supply and the potential for improved export demand as the year progresses could contribute to improved ethanol margins later in the year.
Andersons’ guided planted corn acres in 2015 to be 88 to 89 million acres, while planted bean acres are estimated to be roughly 85 million acres. This will create a good base for the company's grain business in 2015. Further, continued strong performance from the Grain Group's equity investments is anticipated.
The expected acres to be planted will create a conducive environment for the Plant Nutrient Group and will aid growth. Moreover if the spring weather is normal, it will help Andersons regain some of the volume lost in the fourth quarter of 2014 in the first half of 2015. The Rail Group will also benefit from increased lease and utilization rates.
On the flipside, early 2015 ethanol margins are well below 2014 margins and are expected to average lower for the full year. Lower crude price, greater ethanol production and marginally rising ethanol stocks will also hurt growth.
Maumee, OH-based Andersons is a diversified company operating 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.
Andersons currently carries a Zacks Rank #5 (Strong Sell). However, stocks worth considering in the sector include Air Products & Chemicals Inc. (APD), CF Industries Holdings, Inc. (CF) and Cliffs Natural Resources Inc. (CLF). All these stocks hold a Zacks Rank #2 (Buy).
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