Archer Daniels (ADM) Q2 Earnings & Revenues Beat Estimates
Archer Daniels Midland Company ADM has posted impressive second-quarter 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. However, both metrics declined year over year.
Adjusted earnings of $1.89 per share in the second quarter outpaced the Zacks Consensus Estimate of $1.59. However, the figure declined 12% from $2.15 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.70 per share, down 22% from the prior-year quarter’s $2.18.
Revenues fell 7.7% year over year to $25,190 million but surpassed the Zacks Consensus Estimate of $24,897 million.
Segment-wise, revenues for Ag Services & Oilseeds fell 7.4% year over year, whereas Carbohydrate Solutions’ revenues dropped 9.9% year over year. Also, Nutrition witnessed a year-over-year revenue decline of 7.5%.
Meanwhile, we projected revenues for Ag Services & Oilseeds and Carbohydrate Solution segments to decline 14.6% and 8.8%. Then again, we estimated Nutrition revenues to grow 2.4%.
The gross profit decreased 10.3% year over year to $1,883 million but exceeded our estimate of $1,592.6 million. Meanwhile, the gross margin contracted 20 basis points (bps) to 7.5% in the quarter under review. SG&A expenses remained flat at $814 million.
Archer Daniels has reported an adjusted segmental operating profit of $1,628 million in second-quarter 2023, down 12% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits fell 17% year over year to $1,525 million.
Archer Daniels Midland Company Price, Consensus and EPS Surprise
Archer Daniels Midland Company price-consensus-eps-surprise-chart | Archer Daniels Midland Company Quote
Segmental Operating Profit
Adjusted operating profit for Ag Services & Oilseeds fell 6.2% year over year to $1,054 million. This is mainly due to weak North America origination results, which were hurt by lower export volumes due to large South America supplies. However, South America origination results have been solid, driven by record volumes and higher margins stemming from strong export demand. Strategic investments in port capacity to capitalize on the record Brazilian soybean crop bode well.
Crushing results have declined year over year, driven by a drab year-over-year performance in global soy crush margins, stemming from muted demand for meal and oil, and a tight US soybean carryout. On the flip side, robust softseed margins and higher volumes, driven by strong Canadian canola crop and the use of its flex capacity in EMEA, acted as upsides.
Refined Products and Other results have been robust year over year, benefiting from strong food oil demand and improved biodiesel volumes in North America, as well as robust demand for food oil and export demand for biodiesel in EMEA. Also, equity earnings from Wilmar were lower than that in the year-earlier quarter.
The Carbohydrate Solutions segment’s adjusted operating profit plunged 36% to $303 million due to unplanned downtime at one of its corn germ plants. The Starches and Sweeteners sub-segment, including ethanol production from the wet mills, gained from solid demand, as well as robust volumes and margins in North America. Meanwhile, robust margins aided the EMEA region. The global wheat milling business witnessed higher margins, driven by solid demand.
Vantage Corn Processors’ results have been soft due to dismal ethanol margins.
In the Nutrition segment, the adjusted operating profit of $185 million fell 29% from $239 million in the year-ago quarter. The Human Nutrition unit was flat year over year. The Flavors unit was robust on improved mix and pricing in EMEA, and robust demand in North America. Muted demand for plant-based proteins, particularly in the meat alternatives category in North America and Europe, hurt the Specialty Ingredients unit. The Health & Wellness business was flat year over year due to lower demand for fibers, which somewhat offset lower SG&A costs.
The Animal Nutrition unit was weak year over year due to lower margins in amino acids and dismal volumes stemming from soft global feed demand. Also, continued demand fulfillment challenges and inventory losses in Pet Solutions acted as a deterrent.
Other Financials
This Zacks Rank #3 (Hold) player ended the quarter with cash and cash equivalents of $1,426 million; long-term debt, including current maturities, of $8,545 million; and shareholders’ equity of $24,975 million. As of Jun 30, 2023, ADM provided $899 million in cash for operating activities. It repurchased shares worth $1 billion and cash dividends of $494 million in the first half of 2023.
Business Development
The company’s Ag Services & Oilseeds segment invested in infrastructure and operations to achieve record origination volumes in Brazil, while Carbohydrate Solutions has delivered excellent results across global starches and sweeteners. The Nutrition unit witnessed the continued expansion of the customer base and opportunity pipeline. ADM is on track with strategic initiatives related to decarbonization. Management has seen strong results for the first half of 2023. It is optimistic about its second-half performance.
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We note that shares of ADM have gained 7.9% in the past three months against the industry’s 0.6% decline.
Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely TreeHouse Foods THS, Celsius Holdings CELH and Associated British Foods ASBFY.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). THS has a trailing four-quarter earnings surprise of 49.3%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TreeHouse Foods’ current financial-year’s sales suggests a decline of 12.4% from the year-ago reported numbers.
Associated British Foods is a diversified international food, ingredients and retail group, which currently sports a Zacks Rank #1. ASBFY’s expected EPS growth rate for three to five years is 7%.
The Zacks Consensus Estimate for Associated British Foods’ current financial-year sales and earnings suggests growth of 30.4% and 4.2%, respectively, from the year-ago reported figures.
Celsius Holdings currently flaunts a Zacks Rank #2 (Buy). CELH specializes in commercializing healthier, nutritional functional foods, beverages and dietary supplements.
The Zacks Consensus Estimate for CELH’s current financial-year sales indicate 67.9% growth from the year-ago reported figure, and the same for EPS implies a 154% rise. The company had an earnings surprise of 81.8% in the last reported quarter.
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