Shares of The Andersons Inc. ANDE touched a 52-week low of $31.62 on Dec 11, before closing trade a notch higher at $31.85. Year-to-date, shares of this 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, have lost 40% of their value.
Share price of Andersons has been declining since the company reported disappointing third-quarter 2015 results on Nov 4, The company incurred a loss while revenues declined year over year. Andersons’ outlook for the Grain Group remains conservative on lower storage utilization rates. Further, the company remains cautious about the segment’s performance as according to the latest crop report from the United States Department of Agriculture (USDA) production volume is expected to be lower in 2015.
Notably, Andersons’ Plant Nutrient business is highly seasonal and the acquired assets have seasonal volatile characteristics. More specifically, products acquired in the Nutra-Flo acquisition are concentrated in the liquid starter fertilizers which can affect results in the spring planting season as well. Further, a large portion of inventory related to the acquisition is expected to be recorded in the end of the fourth quarter. Thus higher level of inventory can impact earnings.
Further, the spread between ethanol prices and corn costs improved slightly during the third quarter but remained below the nine-year averages. Many industry participants took some downtime for maintenance but total production remained at fairly high levels. Given the production and inventory levels in the market and the foreseeable pressure from low oil prices, Ethanol margins continue to move within a moderate range in the fourth quarter.
Andersons also witnessed decline in the value of distillers dried grains relative to corn price in recent times, mainly due to Chinese import restrictions. These factors will remain headwinds for the company. Additionally, global economic downturn and increased competition will hurt Andersons’ performance in the near term. Andersons has also been bearing the brunt of low oil prices.
Andersons currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the sector are Albany International Corp. AIN, Brady Corp. BRC and Codexis, Inc. CDXS. All these stocks sport a Zacks Rank #1 (Strong Buy).
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