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Will Archer Daniels (ADM) Beat Earnings this Season?

Zacks Equity Research

Archer Daniels Midland Company (ADM) is scheduled to report its fourth-quarter and full-year 2013 results before the market opens on Feb 4. Last quarter, the company’s earnings were below the expectations. Let's see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Though Archer Daniel’s top and bottom line results disappointed in the last quarter due to lower volumes resulting from tight U.S. crop supplies, the company’s operating profits gained from strong performance at its operating segments. Improved operating results at the company’s Oilseeds Processing segment stemmed from strong performances in both North and South America regions. Operating gains at the Agricultural Services were driven by a smooth transition to new crop, while the Corn Processing segment gained from improved ethanol results.

Moreover, Archer Daniels continues to progress well with its proposed deal to acquire leading agribusiness company, GrainCorp Limited, having received a nod from South Africa, Japan, the European Commission and South Korea in the third quarter.  The company has so far received clearance on the deal from 7 out of 9 jurisdictions.

Earnings Whispers?

Our proven model does not conclusively project Archer Daniels as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
 
Zacks ESP: ESP for Archer Daniels is -10.71% since the Most Accurate estimate stands at 75 cents per share, which is below the Zacks Consensus Estimate of 84 cents per share.

Zacks Rank #1 (Strong Buy): Archer Daniels’ Zacks Rank #1 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is undergoing negative estimate revisions.

Other Stocks to Consider

Archer Daniels is not the only firm we are looking up to this earnings season. Our model shows that the following stocks have the right combination to post an earnings beat:

ConAgra Foods Inc’s (CAG) Earnings ESP stands at +1.54% and it carries a Zacks Rank #2 (Buy).

Bunge Ltd. (BG) has an Earnings ESP of +5.69% and a Zacks Rank #2 (Buy).

J&J Snack Foods Corp. (JJSF) with an Earnings ESP of +2.67% holds 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 JJSF


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