On Sep 3, we issued an updated research report on The Andersons, Inc. ANDE. The company is poised to gain from the healthy operating environment for the Grain Group and tax reform. Its focus on improving plant-production efficiency and cost-saving efforts also bode well.
Let’s illustrate these growth factors in detail.
Andersons to Grow on Healthy Grain Operating Environment
Andersons’ Grain Group posted seventh consecutive year-over-year improvement during second-quarter 2018. The Grain operating environment will remain solid through second-half 2018 on the back of optimism in the U.S. corn and soybean crop conditions. Stellar global demand will lead to brighter opportunities for owners of space and handling capacity with trading insights.
Focus on Plant Production Efficiency to Aid Ethanol Group
Andersons’ Ethanol Group continues to succeed in driving plant-production efficiency. All four plants of this group are running well. The group has been able to lock in forward margins on almost half of third-quarter 2018 production and small amounts for the following two quarters. In addition to closely monitoring the progress of the new ELEMENT plant currently under construction, the group continues to evaluate projects that will enhance plant efficiency and produce higher-value co-products.
Cost-Saving Efforts to Stoke Growth
Andersons made significant progress on its cost-savings and productivity initiatives. The company remains focused on the latest run rate additional savings goal of $7.5 million this year, which is expected to be achieved by the end of 2018.
Tax Reform to Drive Andersons’ Earnings
Andersons expects that its 2018 net income will be significantly better than the adjusted 2017 results. It will benefit from a substantial decline in its effective tax rate in 2018. The enactment of the tax reform in December 2017 has reduced the federal income tax rate from 35% to 21%. Andersons reaffirmed its effective tax rate of 23-25% for the year.
Share Price Performance
Over the past year, Andersons has outperformed its industry with respect to price performance. The stock has gained around 28%, while the industry has depreciated around 54%.
Zacks Rank & Other Stocks to Consider
Currently, Andersons carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same sector are Celanese Corporation CE, Huntsman Corporation HUN, and Air Products and Chemicals, Inc. APD. While Celanese and Huntsman sport a Zacks Rank #1 (Strong Buy), Air Products carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese has a long-term earnings growth rate of 10%. The stock has rallied 19% in a year’s time.
Huntsman has a long-term earnings growth rate of 8.5%. Its shares have improved 13% over the past year.
Air Products has a long-term earnings growth rate of 16.2%. The company’s shares have gained 14% during the past year.
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