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Archer Daniels (ADM) Stock Rises on Q4 Earnings & Revenue Beat

Shares of Archer Daniels Midland Company ADM grew more than 1% before the trading session on Jan 26, following the impressive fourth-quarter 2022 results. The top and bottom lines advanced year over year and beat the Zacks Consensus Estimate. Results have been bolstered by robust global demand, continued strength in the Nutrition unit and a solid product portfolio.

Shares of ADM have lost 8.8% in the past three months compared with the industry’s 9.4% decline.

Q4 Highlights

Archer Daniels’ adjusted earnings of $1.93 per share in the fourth quarter outpaced the Zacks Consensus Estimate of $1.64. The figure also jumped 28.7% from $1.50 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.84 per share, up 33.3% from the prior-year quarter’s $1.26.

 

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Revenues advanced 13.6% year over year to $26,231 million, surpassing the Zacks Consensus Estimate of $26,224 million. Solid sales across all segments contributed to the top line.

Segment-wise, revenues for Ag Services & Oilseeds grew 16.3% year over year, whereas Carbohydrate Solutions’ revenues rose 1.9% year over year. Nutrition witnessed year-over-year revenue growth of 7.3%.

The gross profit increased 6.8% year over year to $1,762 million, while the gross margin contracted 40 basis points (bps) to 6.7% in the quarter under review. SG&A expenses rose 14.1% to $897 million.

Archer Daniels has reported an adjusted segmental operating profit of $1,665 million in fourth-quarter 2022, up 17.8% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits grew 16.1% year over year to $1,611 million.

Segmental Operating Profit

Adjusted operating profit for Ag Services & Oilseeds rose 46.2% year over year to $1,184 million. This can be attributable to strength across the South American region, driven by higher margins and volumes, while low water conditions reduced North America export volumes. The Global Trade performance was drab due to lower ocean freight, partly offset by robust results in EMEA origination and destination marketing.

Crushing results have been sharply higher year over year. Strong export volumes for soybean meal and growing domestic demand for renewable diesel contributed to strong margins in North America. Solid oil demand in EMEA led to strong rapeseed margins, which more than offset higher energy costs.

Refined Products and Other results have been strong year over year, benefiting from healthy demand for food oil, renewable diesel in the United States and biodiesel globally. Also, equity earnings from Wilmar were much higher than that in the year-earlier quarter.

The Carbohydrate Solutions segment’s adjusted operating profit declined 39% to $261 million. The Starches and Sweeteners sub-segment, including ethanol production from the wet mills, has recorded improved year-over-year results. This was mainly owing to solid volumes and strong margins in the North America region, which partly offset lower ethanol margins. 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 higher ethanol inventory levels, which, in turn, dented the margins.

In the Nutrition segment, the adjusted operating profit of $131 million fell 18.1% from $160 million in the year-ago quarter. The Human Nutrition unit remained dismal year over year. The Flavors unit remained flat, while the continued momentum aided the Specialty Ingredients unit. The Health & Wellness business witnessed year-over-year growth, driven by the bioactives portfolio, including the results of the Deerland acquisition.

The Animal Nutrition unit was weak year over year due to lower margins in amino acids due to a recovery in the global supply of lysine. Pet nutrition volumes were lower in Latin America, partially by demand fulfillment challenges. Feed results have acted as an upside, driven by APAC and Latin America, partly offset by the impacts of sluggish demand in EMEA.

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

This Zacks Rank #2 (Buy) player ended the quarter with cash and cash equivalents of $1,037 million; long-term debt, including current maturities, of $8,677 million; and shareholders’ equity of $24,317 million. In the nine months ending Dec 31, 2022, ADM used $3,478 million in cash for operating activities.

The board raised its quarterly dividend by 12.5% to 45 cents, payable on Mar 2, 2023, to shareholders as of record as of Feb 9. This marks the 365th consecutive quarterly payment and 50th dividend hike.

3 Other Top-Ranked Consumer Staples Stocks

Here are some other top-ranked stocks from the broader Consumer Staples space, namely e.l.f. Beauty ELF, Conagra Brands CAG and Campbell Soup CPB.

e.l.f. Beauty currently sports a Zacks Rank of 1 (Strong Buy). ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for e.l.f. Beauty’s current financial-year sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.

Conagra Brands, a consumer-packaged goods food company, currently flaunts a Zacks Rank of 1. CAG has a trailing four-quarter earnings surprise of 1.8%, on average.

The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.

Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.

The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the year-ago reported figures.

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