Andersons In The Early Innings Of Improvement; Buckingham Research Upgrades

The brokerage cited three key factors for lifting the rating:

1. Superior crop quality in the Eastern Corn Belt.
2. Dynamics in wheat improved.
3. Stable margins from Ethanol.

These three factors could drive an attractive FCF yield. The brokerage estimates $100 million FCF for the fiscal year 2017, suggesting an attractive 10 percent yield. Analysts Eric Larson and Steven Haynes see this as a potential upside driver for the stock.

Related Link: Andersons Name Anthony Lombardi As New CIO

"ANDE is committed to achieving $10M in annual run rate cost savings by 2017, but we think they will overachieve on that measure. On top of the Iowa divestiture, we estimate ANDE has the potential to add $0.30 to base EPS. ANDE remains committed to rationalizing further costs and non-strategic assets," the analysts opined in their research note to clients.

Following the challenges faced by Andersons in fiscal year 2015, analysts see conditions improved in the ECB "setting the stage for a more favorable harvest and more normalized basis opportunities."

The brokerage believes the stock price does not reflect the potential return from normalized earnings. Buckingham Research predicts $50 in the best scenario and $33 in the worst bear case. The firm's target price reflected estimated EPS of $2.75 for the fiscal year 2017 based on improved recovery.

At time of writing, the stock traded at $34.96, up 0.63 percent.

Full ratings data available on Benzinga Pro.