Agriculture is still hot. The Andersons, Inc. (ANDE – Analyst Report) recently blew past the Zacks Consensus Estimate in the second quarter by 35.7%. This Zacks Rank #1 (Strong Buy) has the rare combination of both an attractive valuation and strong earnings growth.
The Andersons was founded in 1947 by Harold Anderson in Maumee, Ohio with a single grain elevator. It has grown into an agribusiness company with 6 business segments across North America, including in grain, ethanol, plant nutrient, turf and cob products and consumer retailing.
It also has rail equipment leasing interests in Canada and Mexico.
Record Quarter for Ethanol
On Aug 6, The Andersons reported its second quarter results and crushed the Zacks Consensus by 41 cents. Earnings were $1.56 compared to the consensus of $1.15.
The quarter was boosted by the best quarter for the Ethanol Group in its history and strong results from the Plant Nutrient Group. Volume rose 6% in the first half of the year, regaining the loss of volume in the first quarter due to the harsh winter weather.
The Rail Group also contributed in the quarter as the utilization rate rose to 89.1% from 86.1% the prior year. The company expects the utilization rate to continue to rise.
Analysts Are Bullish
2 estimates have moved higher for both 2014 and 2015 in the last 30 days. The 2014 Zacks Consensus Estimate has jumped to $4.17 from $3.32 in that time.
That is earnings growth of 31.2%.
Analysts aren’t quite as bullish about what will happen in 2015 but they see continued earnings growth of 7.9%. Those estimates will likely be revised further as the end of the year approaches.
Shares Spike But Valuation is Still Attractive
After the big earnings beat, shares took off. They recently hit a new 52-week high.
But even with the recent stock surge, the valuation isn’t crazy. The Andersons trades with a forward P/E of just 15.6 which is well below the average of the S&P 500 of 17.
It also has a price-to-sales ratio of just 0.4. A P/S ratio under 1.0 can indicate that a company is undervalued.
Value plus double digit earnings growth is rarely found, especially in this high-flying bull market.
If you’re looking for a small-cap agriculture company, The Andersons should be on your short list.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.
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