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Factors Likely to Decide Archer Daniels' (ADM) Q3 Earnings

Zacks Equity Research
·4 min read

Archer Daniels Midland Company ADM is slated to report third-quarter 2020 results on Oct 29, after market close. The company’s earnings have outperformed the Zacks Consensus Estimate in the trailing four quarters with the average surprise being 45.5% .

Although the Zacks Consensus Estimate for third-quarter earnings has risen 3 cents in the past 30 days to 71 cents, it suggests a decline of 7.8% from the year-ago quarter’s tally. Further, the consensus mark for revenues is pegged at $16.78 billion, indicating growth of 0.3% from the year-ago quarter’s reported figure.

Factors to Note

Archer Daniels is grappling with rising SG&A costs, and any deleverage in the same is likely to have impacted the bottom line during the third quarter of 2020. In addition, the company has been witnessing soft adjusted-operating profit across its Carbohydrate Solutions segment for a while. Management, on its second-quarter earnings call on Jul 30, said that it expects the Carbohydrate Solutions segment results in the third quarter to remain drab year over year. However, recovering demand for sweeteners and healthy demand for wheat milling as well as positive average industry ethanol margins are likely to have provided some cushion.

Nevertheless, Archer Daniels’ nutrition segment has been standing out. The nutrition segment is likely to have benefited from significant gains in Human and Animal Nutrition businesses. On its last earnings call, management envisioned year-over-year growth of nearly 20% in the second half of 2020. In fact, continued growth in flavors, plant-based proteins and probiotics have most likely driven the human-nutrition business, while synergies from the Neovia buyout and improvements in amino acids have contributed to animal-nutrition results in the quarter under review. In addition, Archer Daniels’ three strategic pillars — optimize the core, drive efficiency and grow strategically — as well as focus on Project Readiness, bode well. These factors might have contributed to the company’s top line during the third quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Archer Daniels this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Archer Daniels Midland Company Price and EPS Surprise

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

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

Archer Daniels has an Earnings ESP of -1.56% and carries a Zacks Rank #3.

Stocks With the Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Nu Skin Enterprises NUS presently has an Earnings ESP of +3.54% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newell Brands NWL currently has an Earnings ESP of +0.33% and a Zacks Rank #2.

Grocery Outlet GO currently has an Earnings ESP of +0.24% and a Zacks Rank #2.

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Newell Brands Inc. (NWL) : Free Stock Analysis Report
 
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