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Archer Daniels (ADM) Q2 Earnings & Revenues Beat, Stock Rises

·5 min read

Shares of Archer Daniels Midland Company ADM jumped more than 5% in the pre-market trading session on Jul 26, following the impressive second-quarter 2022 results, wherein both top and bottom lines advanced year over year. This has marked the 11th straight quarter of adjusted operating profit growth.

Despite supply-chain headwinds, results gained from improved productivity, product innovations and persistent growth in the Nutrition segment. Management expects robust earnings, as well as solid cash flows, to accelerate share repurchases of $1 billion in the second half of 2022.

Shares of this Zacks Rank #3 (Hold) company have gained 11.9% year to date compared with the industry’s 9.8% growth.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Q2 Highlights

Adjusted earnings of $2.15 per share in the second quarter outpaced the Zacks Consensus Estimate of $1.75. The figure also surged 62% from $1.33 in the year-ago quarter. On a reported basis, the company’s earnings were $2.18 per share, up 73% from the prior-year quarter’s $1.26.

Revenues advanced 19% year over year to $27,284 million, surpassing the Zacks Consensus Estimate of $25,268 million. Solid sales across the majority of the segments contributed to the top line.

Segment-wise, revenues for Ag Services & Oilseeds grew 17.3% year over year, whereas Carbohydrate Solutions’ revenues rose 33% year over year. The Nutrition segment witnessed year-over-year revenue growth of 15.6%.

The gross profit increased 43.5% year over year to $2,100 million, while the gross margin expanded 130 basis points (bps) to 7.7% in the quarter under review. SG&A expenses rose 10.1% to $814 million.

Archer Daniels reported an adjusted segmental operating profit of $1,849 million in second-quarter 2022, up 59.4% from the year-ago quarter. On a GAAP basis, the company’s segmental operating profits grew 60.7% year over year to $1,840 million.

Segmental Operating Profit

Adjusted operating profit for Ag Services & Oilseeds rose 96.3% year over year to $1,119 million. This was mainly driven by the robust global demand in destination marketing led to strong volumes and margins as well as global ocean freight and gains from favorable timings.

Refined Products and Other remained flat year over year on the back of healthy demand for biofuels and food oils, which drove margins, somewhat offset by negative timing impacts. The crushing business has witnessed strong soy crush margins across all regions, driven by robust meal and oil demand. Favorable timing impacts have also contributed to the quarterly results.

The Carbohydrate Solutions segment’s adjusted operating profit grew 23.5% to $473 million. Vantage Corn Processors performed well year over year, driven by robust gasoline demand and strong ethanol blending economics. Starches and sweeteners improved year over year, owing to the solid demand stemming from robust food service volumes, which reached close to the pre-pandemic levels. Solid demand for corn oil and better risk management boosted ethanol and sweetener margins.

In the Nutrition segment, the adjusted operating profit of $239 million grew 19% from $201 million in the year-ago quarter. The Human Nutrition unit gained from strength across its diverse product portfolio. Continued top-line growth in Flavors, particularly in North America, EMEA and South America, bodes well despite rising costs.

Strength in alternative proteins led to strong soy protein volumes and margins. This, along with gains from the Sojaprotein buyout and healthy demand for texturants, aided the Specialty Ingredients category. The Health & Wellness unit also witnessed robust quarterly improvement, driven by growth in probiotics, gains from its Deerland Probiotics buyout and solid fiber demand. The animal nutrition unit grew significantly year over year, driven by robust volumes and margins in amino acids.

Archer Daniels Midland Company Price, Consensus and EPS Surprise

 

Archer Daniels Midland Company Price, Consensus and EPS Surprise
Archer Daniels Midland Company Price, Consensus and EPS Surprise

Archer Daniels Midland Company price-consensus-eps-surprise-chart | Archer Daniels Midland Company Quote

Other Financials

Archer Daniels ended the quarter with cash and cash equivalents of $906 million; long-term debt, including current maturities, of $9,166 million; and shareholders’ equity of $24,426 million. In the six months ending Jun 30, 2022, the company used $675 million in cash for operating activities.

Stocks to Consider

We highlighted some better-ranked stocks from the broader Consumer Staples space, namely Chef Warehouse CHEF, Sysco Corporation SYY and Campbell Soup CPB.

Sysco, the marketer and distributor of food and related products, currently sports a Zacks Rank #1 (Strong Buy). SYY has a trailing two-quarter earnings surprise of 93.75%, on average. It has an expected long-term earnings growth rate of 11%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 35.9% and 145.5%, respectively, from the year-ago reported numbers. The company has a trailing four-quarter earnings surprise of 3.7%, on average.

Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 372.3%, on average.

The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales and earnings per share suggests growth of 38.1% and 2540%, respectively, from the year-ago reported numbers.

Campbell Soup, the manufacturer and marketer of high-quality, branded convenience food products, currently carries a Zacks Rank #2 (Buy). It has an expected long-term earnings growth rate of 1.6%.

The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings per share suggests growth of 10.1% and 15.4%, respectively, from the year-ago reported numbers. CPB has a trailing two-quarter earnings surprise of 10.8%, on average.


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