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Andersons Q4 Earnings Miss Estimates, Plunge Year on Year

Zacks Equity Research
Updated

The Andersons Inc. ANDE reported fourth-quarter earnings per share of 18 cents, which not only plunged 80% year over year but also missed the Zacks Consensus Estimate of 60 cents by a wide margin of 70%. Including one-time items, the company reported a loss per share of $1.68 as against profits of 89 cents in the prior-year quarter. Andersons’ shares fell 3.82% on the dismal performance.
 

 

Operational Update

Revenues in the reported quarter declined 7% year over year to $1,183 million and also fell short of the Zacks Consensus Estimate of $1,207 million.

Cost of sales fell 6% to $1,084 million from $1,158 million in the year-ago quarter. Gross profit declined 13% year over year to $99 million. Consequently, gross margin contracted 60 basis points to 8.4% in the quarter.

Operating, administrative and general expenses went down 6% year over year to $89 million. Andersons posted an adjusted profit of $10.2 million in the quarter, down 46% year over year.

Segment Performance

The Grain Group: Revenues decreased to $778 million from $867 million in the year-ago quarter. Segment operating income declined substantially to $9.8 million from $24 million in the year-ago quarter. The drop in income was due to poor crop production in the Eastern Corn Belt, reluctance on the part of farmers to sell given the weak prices, and under performance of certain core grain assets and grain affiliates.

The Ethanol Group: Revenues decreased 16% year over year to $143 million. The segment reported an operating income of $7.7 million, tumbling from $28.3 million in the year-ago quarter.

The Plant Nutrient Group: The segment reported revenues of $188 million, up 15% year over year. Operating income of $2.1 million was an improvement from $0.5 million in the prior-year quarter. Sales of plant nutrients had a good start in the fourth quarter but slowed down subsequently as nutrient prices fell, which made farmers hesitant to buy ahead of the spring planting season.

The Rail Group: Revenues increased 16% year over year to $36 million. Operating income rose to $6.8 million from $5.6 million in the year-ago quarter.

Financial Performance

The Andersons ended the year with cash and cash equivalents of $63.7 million compared with $114.7 million at the end of 2014. Long-term debt was $436 million as of Dec 31, 2015, compared with $299 million as of Dec 31, 2014.

Full-Year Performance

Andersons reported adjusted earnings per share of $1.45 in 2015, down 58% from $3.46 per share in the prior year. Earnings fell short of the Zacks Consensus Estimate of $1.80. Including one-time items, the company reported a loss per share of 46 cents as against profits of $3.84 per share in the prior year. Revenues declined 8% year over year to $4.2 million, short of the Zacks Consensus Estimate of $4.3 billion.

In 2016, railroad shipping volumes are expected to continue to feel the pressure, particularly in the energy sector. The Rail Group is well positioned for a slowing rail cycle with currently high utilization rates and a highly diverse lease customer base covering diverse industries.

Corn acres to be planted in 2016 are estimated to be nearly 90 million acres, up slightly from 2015. Soybean acres to be planted are estimated to be approximately 84 million acres, up 2% from 2015. Wheat acres have been reported to be approximately 3 million acres lower this year.  Assuming less unfavourable weather conditions, recovering crop yields are expected to create a good opportunity for the Grain Group in the second half of 2016.

In the Plant Nutrient businesses, Nutra-Flo is expected to provide a positive contribution to earnings in 2016 supporting margin growth for the group as specialty products increase in the mix over time.

Maumee, OH-based The 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.

The Andersons currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the sector include Cosan Limited CZZ, Albany International Corp. AIN and Syngenta AG SYT. All three these stocks carry a Zacks Rank #2 (Buy).

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ALBANY INTL A (AIN): Free Stock Analysis Report
 
COSAN LTD-A (CZZ): Free Stock Analysis Report
 
SYNGENTA AG-ADR (SYT): Free Stock Analysis Report
 
ANDERSONS INC (ANDE): Free Stock Analysis Report
 
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