Archer Daniels Beats on Earnings


Archer Daniels Midland Company (ADM) posted adjusted earnings of 95 cents per share for fourth-quarter 2013, way ahead of the Zacks Consensus Estimate of 84 cents and 58.3% higher than the year-ago comparable quarter’s adjusted earnings of 60 cents. The company’s fourth-quarter results gained from robust operating performance at its Corn and Oilseeds Processing businesses, offset by diminished profits at the Agricultural Services segment.

On a reported basis, including GrainCorp and Brazilian sugar mill related charges and other impairment charges, the company posted earnings of 56 cents per share, substantially below 77 cents earned in the prior-year quarter.

Archer Daniels' quarterly net sales dropped nearly 3.1% year over year to $24,143 million and missed the Zacks Consensus Estimate of $24,923 million.

Segment-wise, the company’s Corn Processing revenues grew by a marginal 0.5% to $3,055 million on account of lower corn costs and improved ethanol margins. Archer Daniels’ Oilseeds Processing segment revenues decreased 2.1% year over year to $8,188 million, Agricultural Services segment witnessed a decline of 5.8% to $12,699 million.

Full-Year 2013 Synopsis

For fiscal 2013, the company reported adjusted earnings per share of $2.33, above the Zacks Consensus Estimate of $2.23 and the prior-year earnings of $2.30. Net sales for the year totaled $89,804 million, a marginal year-over-year dip of 0.8% and short of the Zacks Consensus Estimate of $90,448 million.

Q4 Operational Discussion

Archer Daniels reported adjusted segment operating profit of $1,016 million, an improvement of 33.3% from the year-ago quarter, driven by robust performance at the Oilseeds and Corn processing segments, offset by weak performance at the Agricultural Services segment.

On a segmental basis, the Oilseeds Processing segment recorded an operating profit of $478 million compared with $411 million in the year-ago period. The $67 million improvement resulted from efficient fulfillment of the robust global demand for meal and superior biodiesel results in North America and Europe.

Archer Daniels' Corn Processing segment registered a whopping $296 million increase in operating profit to $315 million from the year-ago quarter. The increase was primarily attributable to healthier market conditions as corn costs witnessed a dramatic improvement along with solid seasonal demand and improved ethanol margins owing to the robust domestic and international demand.

Operating profit for the Agricultural Services segment rose 21.3% to $201 million as merchandising and handling remained weak due to a slow farmer-selling of corn and challenges in international merchandising, offset by strong performance at the milling and other business. Transportation remained flat during the quarter.

Other Business segment posted operating profit of $22 million, down from $77 million reported in the prior-year quarter.


Archer Daniels ended fiscal 2013 with $3,121 million in cash and cash equivalents compared with $1,714 million at the end of the prior year. At year-end, long-term debt including current maturities was $6,512 million, down $212 million from a debt of $6,724 million at the end of fiscal 2012.

Shareholders’ equity as of Dec 31, 2013 was $20,154 million. Moreover, the company displayed vigilance in capital spending during the quarter and came up with a balanced capital plan for 2014.

During the fourth quarter, the company declared a 26% rise in its dividend and laid out a plan to buyback 18 million shares by the end of 2014 as part of its balanced capital allocation strategy. Per the strategy, the company intends to return about $1.4 billion to shareholders in the form of dividend and share repurchases and plow back $1.4 billion into the business in the form of capital spending and small M&As in 2014.

Other Stocks Worth Considering

Archer Daniels currently carries a Zacks Rank #1 (Strong Buy). Other stocks performing well in the agricultural products industry include Gruma S.A.B. de CV (GMK), Bunge Limited (BG) and ConAgra Foods Inc. (CAG). Of these, Gruma carries a Zacks Rank #1 (Strong Buy), while Bunge and ConAgra have a Zacks Rank #2 (Buy).

Read the Full Research Report on ADM
Read the Full Research Report on CAG
Read the Full Research Report on BG
Read the Full Research Report on GMK

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