The Andersons, Inc. ANDE has been disappointing investors, of late. The stock has been down 28.5%, year to date. Here’s what might pull down this grain merchandiser’s shares and why investors should sell the stock.
Estimates Moving South
The company has seen the Zacks Consensus Estimate for current-year and 2018 earnings being revised downward over the past 60 days, reflecting analysts’ bearish sentiments. For 2017, estimate has dropped 19% to $1.08 and for 2018, it declined 18% to $1.83.
Price Performance
Shares of Andersons have underperformed the industry over the past year. The stock has lost 27.6%, while the industry recorded growth of 10.8%.
Negative Earnings Surprise History
The company missed the Zacks Consensus Estimate in three out of the trailing four quarters. Further, it witnessed an average negative earnings surprise of 27.7% over the last four quarters.
Expensive Valuation
Andersons’ trailing 12-month price to earnings (P/E) ratio is 30.1, above the industry's average trailing 12-month P/E ratio at 24.2. This implies that the stock is overvalued.
Headwinds
Andersons’ Ethanol Group continues to be affected by lower DDG (distillers dried grains) margins due to problems with vomitoxin in the vicinity of the group's three eastern facilities. Lower international demand for DDGS also continues to put pressure on its pricing and margins. Also, margins continue to be stressed by higher ethanol production in inventory despite strong exports.
Notably, an unfavorable combination of oversupply, low prices and margins will impact Andersons’ Plant Nutrient group. Additionally, conservative purchasing decisions of a lower customer base have been depressing the company’s revenues. Further, its Rail Group continues to be marred by an oversupplied market and pressure on lease rates.
Key Picks
Some better-ranked stocks in the same sector are Daqo New Energy Corp. DQ, Huntsman Corporation HUN and Koppers Holdings Inc. KOP, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Daqo New Energy has an expected long-term earnings growth rate of 7%. Year to date, its shares have soared 174%.
Huntsman has an expected long-term earnings growth rate of 8%. Shares of the company have surged 74.8% year to date.
Koppers Holdings has an expected long-term earnings growth rate of 18%. Its shares have rallied 27.7% during the same time frame.
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