MW Archer Daniels Midland draws dreaded 'sell' rating despite laying off hundreds

By Steve Gelsi

Analyst cuts ADM to sell as ethanol maker faces 'weaker' market view on biofuel, trade-policy turmoil

Archer Daniels Midland Co.'s efforts to boost its prospects by cutting hundreds of jobs failed to ignite much enthusiasm from CFRA analyst Arun Sundaram, who has downgraded the food- and fuel-processing giant to sell from hold.

Archer Daniels Midland $(ADM)$ continues to face "ongoing softness in the agricultural products markets, along with uncertainty regarding future biofuel policies and tariffs or trade wars under the new Trump administration," Sundaram said on the heels of the company's fourth-quarter results.

CFRA also knocked off $10 a share from ADM's target price, to $46 a share.

The stock fell 3.5% to $48.28 a share on Tuesday.

In a move to save $500 million to $750 million, Archer Daniels Midland said it would cut 600 to 700 jobs across the globe.

While uncertainty continues to cloud its prospects, ADM's profit will likely trough in 2025 at about $4.60 a share after peaking in 2022 at $7.85 share, and will increase from there, Sundaram said.

Even with its challenges, ADM offers a "solid balance sheet and recently extended its share-repurchase program," the analyst said.

As the U.S. dollar DXY climbs, ADM's exports of agricultural products could grow more expensive for buyers overseas, Sundaram added.

Another uncertainty rests with softness in the food-and-beverage industry, which could impact ADM's Nutrition business - one its fastest-growing and most profitable segments.

Earlier on Tuesday, ADM said its fourth-quarter profit fell 9% to $667 million, as it issued a cautious outlook for 2025.

The company said it expects to generate adjusted 2025 earnings of $4 to $4.75 a share to reflect "weaker market fundamentals and ongoing biofuel and trade policy uncertainty."

The midpoint of the estimated range would fall well below the FactSet analyst consensus estimate of $4.71 a share.

"Going into 2025, we are focused on improving our operational performance, accelerating costs savings, and simplifying our portfolio," the company said.

Archer Daniels Midland earned $1.17 a share in the fourth quarter. The company's adjusted earnings of $1.14 a share matched the Wall Street analyst estimate, according to FactSet data.

Fourth-quarter revenue fell to $21.5 billion from $22.98 billion in the year-ago quarter, and missed the analyst estimate of $22.77 billion.

Prior to Tuesday's trading, ADM's stock had dipped by 1% in 2025, while the S&P 500 SPX has risen 1.9%.

-Steve Gelsi

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February 04, 2025 14:25 ET (19:25 GMT)

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