BB&T Upgrades Andersons To Buy (ANDE)

BB&T Capital Markets is out with a research report this morning, where they upgrade shares of Andersons Inc. ANDE to Buy from Hold; they have a $41 price target on the stock. BB&T analysts cited the fundamental outlook for the company, which they believe will benefit in Q2 2010 from its wheat position. They noted, “Wheat basis has narrowed nearly $0.25/bushel from the end of Q1 to the present as compared to a $0.09 contraction in Q2 last year. The CME instituted variable storage rates (VSR), effective with the July 2010 CBOT wheat contract, in order to force convergence between spot and futures prices, which have been at chronically large levels over the past 1-2 years.” “The VSR rule allows elevators to vary the maximum storage charge it imposes and for the charge to be a function of the spread in the futures market. This has resulted in significant contraction in the wheat basis. Spot Chicago SRW prices are now at a premium to the nearby futures. 
ANDE should benefit significantly from this as its wheat stores are significant and Toledo is a delivery point for SRW wheat.” They also said that ethanol profitability should “benefit from adept forward contracting earlier in the year, while Lansing is expected to benefit from increased volumes and recent acquisitions.” BB&T analyst closed by saying, “We have increased our Q2’10 EPS estimate to $1.25 from
$1.19, which takes our full year 2010 estimate to $2.96 from $2.90. Our more bullish estimate largely reflects our belief that wheat basis trends should meaningfully benefit Q2 results. We have also raised our FY’11
EPS estimate to $3.15 from $3.00.”