ANDE’s H2 Uncertain Due To Wheat Condition But Overall Trends Positive

Analysts at BB&T Capital Markets reiterate their "buy" rating on The Andersons

. The target price for ANDE is set to $41. The Andersons reported its Q2 EPS ahead of the estimates and the consensus. According to BB&T Capital Markets, “Very strong earnings in the grain, ethanol and plant nutrient segments drove performance for the quarter, and grain and plant nutrient exceeded our projections. As we had expected, the company generated strong earnings from wheat basis gains and fertilizer volumes were up more than one third from last year. Rail slightly disappointed for the quarter as utilization came in below our projection.” Although the analysts were concerned regarding H2 due to “the recent surge in wheat futures,” management’s tone “was more confident” than anticipated. “It has bought wheat on the way down and its wheat position is large. Basis should ultimately converge (VSR should help ensure this) over the next few quarters and we believe ANDE would greatly benefit. Further, the corn crop is progressing very nicely and looks to be very large—likely record large, in our view. We believe ANDE could feasibly handle record volumes this year through its elevators,” the analysts say. “Management anticipates very large acreage planted to corn and wheat over the next year given current prices. This benefits its grain business (corn and wheat are the largest contributors to profitability for the group), as well as fertilizer. Management believes fertilizer prices have bottomed and should trend higher from current levels,” BB&T Capital Markets mentions.