Archer Daniels Midland Had a Disappointing End to 2015
Will Archer Daniels Midland Beat Analysts' Estimates in 1Q16?
Revenue took a toll
Archer Daniels Midland (ADM) missed revenue estimates by 15% for 4Q15. It has been missing estimates for the past eight quarters. The net sales for 4Q15 were ~$16.4 billion—a year-over-year decline of 21%. The revenue even missed estimates of $70.7 billion for fiscal 2015. It was ~$67.7 billion.
Archer Daniels Midland suffered due to negative market conditions through the fourth quarter. This impacted many of its businesses throughout the year. Poor segmental growth along with currency headwinds almost impacted the sales. In the fourth quarter, the company’s segments were impacted by various factors like lower North American export volumes and margins, pricing pressures from falling crude oil prices, and high industry production levels.
Earnings fell
Archer Daniels Miland’s adjusted EPS (earnings per share) declined for the last three quarters of 2015. The EPS fell by 39% to $0.61 in 4Q15. It even missed estimates by 8%. The adjusted EPS of $0.61 excluded ~$0.70 of gains on the sale or revaluation of assets. It also excluded $0.24 of charges associated with asset impairments and restructurings as well as net credits of $0.12. For fiscal 2015, the EPS fell by 19%. It was ~$2.60—compared to $3.2 in 2014.
Thin margins in 4Q15
Global dynamics impacted margins across the US agricultural export sector, the US ethanol industry, and the global soybean crushing industry. The company’s margins have been falling for the past few quarters. The margins even fell in 4Q15. The company’s 4Q15 operating and net margins of 1.7% and 0.6%, respectively, were below analysts’ estimates
Peers’ performance
Archer Daniels Midland’s peers in the industry include McCormick & Company (MKC), Flowers Foods (FLO), and General Mills (GIS). They had operating margins of 12.5%, 6.0%, and 14.6%, respectively, in their last reported quarters. To gain exposure to these stocks, you can invest in ETFs like the PowerShares Dynamic Food & Beverage Portfolio (PBJ) and the Guggenheim S&P 500 Equal Weight Consumer Staples ETF (RHS). PBJ and RHS invest 10.2% and 7.5% of their respective portfolios in these stocks.
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