Why Andersons Shares Dropped Then Rebounded

Is this meaningful or just another movement?

Sean Williams
Sean Williams
Feb 7, 2013 at 9:15PM
Energy, Materials, and Utilities

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of The Andersons (NASDAQ:ANDE), a diversified farm products company, shot lower by as much as 10%, following the release of its fourth-quarter earnings report, only to claw its way back to a loss of just 1% as of this writing.

So what: For the quarter, Andersons showed robust sales growth of 29%, to $1.68 billion, yet EPS declined by 32% from the prior year to just $0.80. The $1.68 billion in sales was well ahead of the $1.42 billion predicted by analysts, but EPS fell $0.09 shy of the $0.89 estimate. Andersons's rail and plant nutrient group offered the biggest year-over-year gains, while its grain and ethanol segment dragged down its profits, despite the overall bump in revenue. Andersons placed a lot of the blame on the record drought experienced last year for its weaker income.

Now what: I admit to not being a big fan of Andersons in year's past, but that's quickly changing due to its solid business diversification, as well as the fact that weather patterns should normalize from the anomalous dry spell we encountered last year. Even with a record drought, Anderson's earned $4.23 for the year and, I figure, could earn well in excess of $5 if the weather even remotely normalizes and its grain and ethanol production returns to normal levels. Combined with a rapidly-growing rail segment, at just 10 times forward earnings, I'd call this a surprisingly good value.

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