Earnings Preview: Archer Daniels - Analyst Blog
August 01 2011 - 11:45AM
Zacks
Archer Daniels Midland Company (ADM), one of
the leading food processing companies in the world, is scheduled to
report its fourth-quarter 2011 financial results before the opening
bell on August 2, 2011.
The current Zacks Consensus Estimates for the quarter is
earnings of 84 cents a share. For the quarter under review, revenue
is expected at $20,484.0 million, according to the Zacks Consensus
Estimate.
Third-Quarter 2011 Summary
Archer Daniels reported robust third-quarter 2011 results. Net
income for the reported quarter was $578.0 million or 86 cents per
share compared with $421.0 million or 65 cents per share in the
year-ago quarter. Quarterly earnings also outpaced the Zacks
Consensus Estimate by a penny.
The robust quarterly result was primarily attributable to
increased segmental profit, partially offset by negative
discrepancy from changes in Last-In-First-Out (LIFO) inventory
valuations caused by higher agricultural commodity prices.
ADM's quarterly net sales climbed 32.6% year over year to
$20,077.0 million, beating the Zacks Consensus Estimate of
$17,279.0 million. The growth in net sales was mainly attributable
to a robust jump of 37.6% in Agricultural Services to $9,340.0
million, a rise of 30.6% in Oilseeds Processing revenues to
$6,642.0 million and an increase of 28.2% in Corn Processing
revenues to $2,513.0 million.
Fourth-Quarter 2011 Zacks Consensus
The analyst covered by Zacks expects Archer Daniels Midland to
post fourth-quarter 2011 earnings of 84 cents a share, which is
higher than earnings of 69 cents delivered in the prior-year
quarter. The current Zacks Consensus Estimate ranges between
earnings of 74 cents and $1.00 a share.
Zacks Agreement & Magnitude
Of the 12 analysts following the stock, only one analyst
revisited and downgraded its estimate, over the last 7 days for the
fourth quarter of fiscal 2011. Two out of 3 analysts revisiting
their estimates have downgraded and only one has upgraded it over
the last 30 days.
Mixed Earnings Surprise History
With respect to earnings surprises, ADM has thrice topped the
Zacks Consensus Estimate over the last four quarters in the range
of approximately negative 28.0% to positive 48.1%. The average
remained at approximately 14.8%. This suggests that ADM has beaten
the Zacks Consensus Estimate by an average of 14.8% in the trailing
four quarters.
Our View
Archer Daniels Midland is in the midst of a brisk expansion
strategy, which includes expanding crushing capacities in North
America, and fertilizer blending and biodiesel capacities in South
America. Moreover, in Europe, the company has acquired processing
facilities in Czech Republic and Germany.
These initiatives offer a strong upside potential to the
company. Moreover, the world is facing tight supply of
milling-quality wheat resulting from continued reductions in the
production of Australian wheat crop and depletion in supply from
Europe.
The U.S. is becoming the best source for milling quality wheat
due to a variety of buyers in North Africa and Middle East. ADM is
expected to benefit from this as it has a substantial quantity of
milling wheat in storage.
In addition, Archer Daniels Midland is one of the leading
players in the global food processing industry and commands a
massive network of more than 560 processing and sourcing facilities
and 27,000 vehicles operating across the Americas, Europe and Asia
for transportation of agricultural commodities. This provides a
strong competitive advantage to the company and strengthens its
well-established position in the market.
However, ADM's operating performance is based on the
availability and price of agricultural commodities, which in turn,
is dependent on factors, such as weather, plantings, government
programs and policies, changes in global demand and standards of
living. Therefore, the company is prone to significant risks from
adverse fluctuations due to these factors.
Furthermore, agricultural commodity-based business is a
capital-intensive business and hence requires sufficient liquidity
and financial flexibility to fund the operating and capital
requirements. For this, ADM relies on cash generated from
operations and external financing. Limitations on access to
external financing could negatively affect the company's operating
results.
Archer Daniels Midland, which competes with Bunge
Limited (BG) and Corn Products International
Inc. (CPO), currently has a Zacks #4 Rank, implying a
short-term Sell rating on the stock. Besides, the company retains a
long-term Neutral recommendation.
ARCHER DANIELS (ADM): Free Stock Analysis Report
BUNGE LTD (BG): Free Stock Analysis Report
CORN PROD INTL (CPO): Free Stock Analysis Report
Zacks Investment Research
Bunge Global (NYSE:BG)
Historical Stock Chart
From May 2024 to Jun 2024
Bunge Global (NYSE:BG)
Historical Stock Chart
From Jun 2023 to Jun 2024