Shares of The Andersons Inc. (ANDE) gained around 1% and closed at $86.19 on Feb 11, after the company posted record fourth-quarter 2013 earnings. The company’s earnings per share increased an impressive 104% to $1.08 from 53 cents (adjusted to reflect the company's Feb 2014 three-for-two stock split) earned in the year-ago quarter. However, the reported figure fell short of the Zacks Consensus Estimate of $1.58.
Operational Updates
Revenues in the reported quarter declined 5.9% year over year to $1.6 billion. The results were in line with Zacks Consensus Estimate of $1.68 billion.
Cost of sales fell 7% to $1.47 billion from $1.58 billion in the year-ago quarter. Gross profit improved 20% year over year to $109 million. Consequently, gross margin expanded 150 basis points (bps) to 6.9% in the quarter.
Operating, administrative and general expenses went up 23% year over year to $85.8 million. Operating profit grew 10.3% to $23.8 million. Thus, operating margin expanded 20 bps to 1.5% in the quarter.
Segment Performance
The Grain Group: Revenues decreased 8.3% year over year to $1.1 billion. Operating income increased 22% to $22.1 million.
The Ethanol Group: Revenues decreased 8.3% year over year to $197 million. The segment reported record operating income of $26.6 million, a substantial improvement from a loss of $0.8 million in the year-ago quarter.
The Plant Nutrient Group: The segment reported revenues of $171 million, down 4% from the year-ago quarter. Its operating profit came in at $6.2 million against $4.7 million in the prior-year quarter.
The Rail Group: Revenues rose 10% year over year to $32 million. Operating income declined 27.9% to $6.2 million from $8.6 million in the year-ago quarter.
The Turf & Specialty Group: The segment posted revenues of $23 million, marking a 9.5% year-over-year increase. The segment reported an operating loss of $1.4 million, wider than the year-ago quarter loss of $1.2 million.
The Retail Group: Revenues in the segment decreased 9.5% year over year to $37.3 million. Operating loss in the quarter was $3.8 million, wider than the loss of $0.8 million in the prior-year quarter.
Financial Performance
Andersons ended 2013 with cash and cash equivalents of $309 million, up from $138 million as of 2012-end. The long-term debt of the company decreased to $375 million as of Dec 31, 2013 from $427 million as of Dec 31, 2012. Consequently, debt-to-capitalization ratio contracted 500 bps to 37% as of Dec 31, 2013 from year-ago comparable period.
Fiscal 2013 Performance
For full-year 2013, Andersons reported earnings per share of $3.18, up 12.7% from $2.82 (adjusted to reflect the company's Feb 2014 three-for-two stock split) in 2012. The results missed the Zacks Consensus Estimate of $4.74.
Revenues for the year 2013 increased 5.7% year over year to $5.6 billion. Revenues were in line with the Zacks Consensus Estimate.
On Dec 2013, Andersons announced that its Board has approved a three-for-two split to enhance the liquidity of shares. Shareholders will receive one additional share for every two shares they hold on the record date of Jan 21, 2014, in the form of a dividend to be distributed as of the close of business of Feb18, 2014.
In addition, the Board had approved a first-quarter 2014 cash dividend of 16.5 cents per share, which was paid on Jan 23, 2014 to shareholders of record on Jan 2, 2014.
Acquisitions
In December, Andersons finalized the acquisition of the granulation manufacturer, Cycle Group, Inc. The company purchased the assets of Cycle Group to expand the Turf & Specialty Group's granulation business geographically. In addition, the acquisition will increase the production and distribution capabilities in the high-value markets of the granular business and help to serve customers better.
Our Take
Andersons will continue to benefit from other acquisitions in the past year. The acquisition of Blenheim, Ontario-based Thompsons Ltd., a grain and food-grade bean handler and Mile Rail, LLC, a provider of agronomy input as well as railcar repair and cleaning equipment will be accretive to earnings for full-year 2014.
Though margins improved in the ethanol business, the company cautions that the ethanol market will continue to be volatile. According to reports, the U.S. Environmental Protection Agency (EPA) is considering a reduction in the amount of ethanol required to be blended with gasoline in 2014. If the proposed reduction is adopted, it would affect ethanol producers like Andersons.
Maumee, Ohio-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 short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Gruma S.A.B. de CV (GMK), Amira Nature Foods Ltd. (ANFI) and Calavo Growers Inc. (CVGW). While Gruma S.A.B. de CV sports a Zacks Rank #1 (Strong Buy), Amira Nature Foods and Calavo Growers have a Zacks Rank #2 (Buy).
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