Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 27 Jan, 25 | ANDE | Buy | USD 42.56 | USD 45.0 | USD 46.42 | 23 days | 9.1% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
The Andersons, Inc. operates in trade, renewables, and nutrient and industrial sectors in the United States, Canada, Mexico, Egypt, Switzerland, and internationally. It operates through three segments: Trade, Renewables, and Nutrient & Industrial. The company's Trade segment operates grain elevators; stores commodities; and provides grain marketing, risk management, and origination services, as well as sells commodities, such as corn, soybeans, wheat, oats, ethanol, and corn oil. This segment also engages in the commodity merchandising business, as well as offers logistics for physical commodities, such as whole grains, grain products, feed ingredients, domestic fuel products, and other agricultural commodities. Its Renewables segment produces, purchases, and sells ethanol, and co-products, as well as offers facility operations, risk management, and marketing services to the ethanol plants it invests in and operates. The company's Nutrient & Industrial segment manufactures, distributes, and retails agricultural and related plant nutrients, liquid industrial products, corncob-based products, and pelleted lime and gypsum products, as well as turf fertilizer, pesticide, and herbicide products; and crop nutrients, crop protection chemicals, and seed products, as well as provides application and agronomic services to commercial and family farmers. In addition, this segment produces corncob-based products for laboratory animal bedding and private-label cat litter, as well as absorbents, blast cleaners, carriers, and polishers; professional lawn care products for golf course and turf care markets; fertilizer and weed, and pest control products; dry and liquid agricultural nutrients, pelleted lime, gypsum, and soil amendments; and micronutrients, as well as industrial products comprising nitrogen reagents, calcium nitrate, deicers, and dust abatement products. The Andersons, Inc. was founded in 1947 and is based in Maumee, Ohio.
Improved Trade Segment Results: The Trade segment reported a significant year-over-year improvement in adjusted pretax income, increasing by $17.3 million to $22.7 million in Q3 2024, compared to $5.4 million in Q3 2023
Record Adjusted EBITDA: The Andersons achieved a record adjusted EBITDA of $97 million in the third quarter of 2024, marking an increase of $27.1 million compared to $70.3 million in the same period of 2023
Lower Nutrient & Industrial Segment Contribution: The Nutrient & Industrial segment saw a year-over-year decline in year-to-date pretax income, falling by $8.3 million from $23.7 million in 2023 to $15.4 million in 2024.
Decline in Adjusted EBITDA Year-to-Date: Year-to-date adjusted EBITDA decreased by $23.1 million, dropping from $270 million in 2023 to $246.9 million in 2024.
The Andersons faces investment risks from commodity price volatility, execution challenges in growth projects, reliance on agricultural cycles, and sensitivity of the Renewables segment to ethanol crush margins and feedstock price fluctuations.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 42.56 | 39.5 | 45.0 | 46.42 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Strong Financial Performance in the Third Quarter
The Andersons reported net income attributable to the company of $27 million, or $0.80 per diluted share, for the third quarter of 2024. Adjusted net income was $25 million, or $0.72 per diluted share, while adjusted EBITDA reached a record $97 million for the quarter. Despite lower commodity prices and reduced market volatility, the company delivered robust results, reflecting strong operational performance and favorable market conditions.
Record-Breaking Performance in Renewables
The Renewables segment achieved its best-ever third-quarter pretax income of $53 million, with pretax income attributable to the company totaling $28 million. This growth was supported by strong ethanol production and improved yields, despite softening ethanol crush margins. Lower corn basis costs and efficient plant operations contributed to increased profitability.
Trade Segment Delivers Improved Results
The Trade segment recorded a pretax income of $26 million and adjusted pretax income of $23 million, both significantly higher than the prior year's results. The segment benefited from strong elevation margins, space income related to corn and wheat, and a growing specialty ingredients business. With assets well-positioned for a large harvest and low basis levels, the segment is poised to capitalize on carry opportunities in the coming quarters.
Growth Investments in Key Markets
The Andersons announced several strategic investments, including an $85 million acquisition for a 65% ownership in Skyland Grain, LLC, expanding its footprint across Southwest Kansas, Eastern Colorado, and parts of Texas and Oklahoma. Additionally, the company invested in a leased facility at the Port of Houston to enhance grain export capabilities and add storage capacity for soybean meal. These investments align with the company’s strategy to grow its portfolio and improve operational efficiency.
Nutrient & Industrial Sees Incremental Improvement
The Nutrient & Industrial segment reported a reduced pretax loss of $6 million, compared to a loss of $8 million in the prior year. While margins in base nutrients returned to normalized levels, the engineered granules business experienced significant growth due to higher sales volumes and margins. Looking ahead, the segment anticipates further improvement in the fourth quarter, supported by high yields and early fall applications.
Strong Balance Sheet and Cash Flow Management
The Andersons demonstrated financial discipline, maintaining a robust balance sheet with a long-term debt-to-EBITDA ratio well below the target of 2.5 times. Cash from operations before working capital changes reached $86 million for the quarter, and capital expenditures increased to $38 million. The company remains committed to evaluating growth projects and acquisitions that align with its strategic objectives.
Favorable Tax and Corporate Positioning
The company reported an effective income tax rate of 17% for the quarter, influenced by noncontrolling interests and federal tax credits. The full-year adjusted effective tax rate is expected to be between 14% and 18%. This tax efficiency, coupled with ongoing investments and operational improvements, underscores the company’s focus on delivering long-term shareholder value.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Andersons, Inc. (NASDAQ: ANDE) at the closing price of USD 42.56, as on January 24, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Food Distribution
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| ANDE The Andersons Inc |
0.17 0.40% | 43.10 | 13.14 | 20.92 | 0.14 | 1.19 | 0.15 | 4.54 |
| SYY Sysco Corporation |
-0.035 0.05% | 75.00 | 20.66 | 16.72 | 0.48 | 17.38 | 0.63 | 12.66 |
| JRONF Jerónimo Martins SGPS S.A |
- -% | 21.50 | 18.10 | 22.22 | 0.53 | 5.17 | 0.62 | 8.78 |
| JRONY Jeronimo Martins SGPS SA ADR |
1.15 2.71% | 43.56 | 19.98 | 23.09 | 0.54 | 5.70 | 0.62 | 8.86 |
| BZLFY Bunzl plc |
-0.29 1.51% | 18.86 | 12.45 | 17.09 | 1.31 | 2.10 | 1.20 | 11.87 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 24, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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