It has been about a month since the last earnings report for Archer Daniels Midland (ADM). Shares have lost about 1.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ADM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Archer Daniels posted mixed fourth-quarter 2024 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed. Both metrics declined on a year-over-year basis.
Adjusted earnings of $1.14 per share surpassed the Zacks Consensus Estimate of $1.07. However, the figure decreased from earnings of $1.36 per share in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.17 per share, up 10.4% from the year-ago quarter’s $1.06.
Revenues fell 6.5% year over year to $21.5 billion and lagged the consensus estimate of $21.9 billion. The top line was hurt by lower revenues at its Ag Services & Oilseeds unit.
Segment-wise, revenues for Ag Services & Oilseeds fell 8.6% year over year to $16.9 billion, while Carbohydrate Solutions’ revenues increased 7.7% year over year to $2.8 billion. Nutrition’s revenues grew 5.9% year over year to $1.8 billion. The Zacks Consensus Estimate for the segments’ revenues was pegged $17.2 billion, $2.4 billion and $1.7 billion, respectively.
The gross profit decreased 17.6% year over year to $1.4 billion while the gross margin fell 90 basis points to 6.5%. SG&A expenses rose 2.6% year over year to $943 million.
Archer Daniels reported a segmental operating profit of $1.1 billion, down 16% from the year-ago quarter.
The company has a trailing four-quarter return on invested capital of 8.3%, on an adjusted basis.
The segment operating profit for Ag Services & Oilseeds plunged 32% year over year to $644 million. The Ag Services subsegment’s operating profit rose 19%, owing to increased origination volumes and margins in North America, backed by improved river conditions. Gains from positive timing impacts, and increased destination marketing volumes and margins in Global Trade acted as positives.
The Crushing subsegment’s operating profit dropped 46% year over year, as higher industry run rates, increased manufacturing costs, and biofuel and trade policy uncertainty led to lower executed crush margins in North America, partly offset by higher margins and volumes in EMEA. The quarter had $52 million of insurance proceeds for part settlement of the Decatur East and West claim.
The Refined Products & Other subsegment’s operating profit declined 57%, as biofuel and trade policy uncertainty, pre-treatment capacity and increased imports of used cooking oil hurt margins in Europe and North America. Weak demand from food customers in North America negatively affected refining margins year over year. In the reported quarter, there were nearly $50 million of net negative mark-to-market timing effects against approximately $5 million of net positive impacts in the year-ago quarter. Equity earnings from ADM’s investment in Wilmar were about 20% lower year over year.
The Carbohydrate Solutions segment’s operating profit rose 3% year over year to $319 million. The Starches and Sweeteners sub-segment fell 3% year over year as increased volumes and margins in North America were offset by reduced co-product values and margins in EMEA. The current quarter comprised $37 million of insurance proceeds with respect to the partial settlement of the Decatur East and West insurance claim. In the Vantage Corn Processing subsegment, operating profit rose on increased ethanol export volumes and improved ethanol margins.
The Nutrition segment reported an adjusted operating profit of $88 million against an operating loss of $10 million in the year-ago quarter. The Human Nutrition subsegment’s operating profit was $62 million against a loss of $25 million in the prior-year quarter. Results benefited from the lapping of non-recurring adverse impacts from the prior year, increased volumes and improved mix, and robust performance by recent M&A, partly offset by higher costs. In the Animal Nutrition subsegment, operating profit was $26 million, up year over year, as cost-optimization actions and lower input costs aided higher margins.
The company ended the quarter with cash and cash equivalents of $611 million; long-term debt, including current maturities, of $8.3 billion; and shareholders’ equity of $22.2 billion. As of Dec. 31, 2024, ADM provided $2.8 billion in cash for operating activities.
The company repurchased shares worth $2.3 billion and cash dividends of $985 million during 2024. Given a balanced approach to capital allocation, management has announced a 2% hike in the quarterly dividend. The company’s board has declared a cash dividend of 51 cents per share, up from 50 cents per share. This is payable March 11, 2025 to shareholders of record as on Feb. 18, 2025. This is the company’s 93rd straight year of uninterrupted dividends.
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -44.27% due to these changes.
At this time, ADM has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ADM has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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