Stock of the Day

June 18, 2020

Archer-Daniels-Midland (ADM)

$48.30
+$1.75 (+3.8%)
Market Cap: $22.28B

About Archer-Daniels-Midland

Archer-Daniels-Midland Company engages in the procurement, transportation, storage, processing, and merchandising of agricultural commodities, ingredients, flavors, and solutions in the United States, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, the United Kingdom, and internationally. It operates in three segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. The company originates, merchandises, stores, and transports agricultural raw materials, such as oilseeds and soft seeds. It also engages in the agricultural commodity and feed product import, export, and distribution; and various structured trade finance activities. In addition, the company offers soybean meal and oil; vegetable and salad oils and protein meals; ingredients for the food, feed, energy, and industrial customers; margarine, shortening, and other food products; and partially refined oils to produce biodiesel and glycols for use in chemicals, paints, and other industrial products. Further, it provides peanuts, peanut-derived ingredients, and cotton cellulose pulp; sweeteners, corn and wheat starches, syrup, glucose, wheat flour, and dextrose; alcohol, and other food and animal feed ingredients; ethyl alcohol and ethanol; corn gluten feed and meal; distillers' grains; corn germ; and citric acids. Additionally, the company provides proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, postbiotics, enzymes, and botanical extracts; and other specialty food and feed ingredients; edible beans; formula feeds, and animal health and nutrition products; and contract and private label pet treats and food products. It also offers futures commission merchant; commodity brokerage services; cash margins and securities pledged to commodity exchange clearinghouse; and cash pledged as security under certain insurance arrangements. The company was founded in 1902 and is headquartered in Chicago, Illinois.

Archer-Daniels-Midland Bull Case

Here are some ways that investors could benefit from investing in Archer-Daniels-Midland Company:

  • The company reported an EPS of $1.14 for the latest quarter, exceeding analysts' expectations of $1.07, indicating strong financial performance.
  • Archer-Daniels-Midland Company has initiated a share repurchase plan allowing the buyback of 100 million shares, which often signals that the company's leadership believes the stock is undervalued, potentially enhancing shareholder value.
  • The recent quarterly dividend was increased to $0.51 per share, reflecting a commitment to returning value to shareholders, with an annualized yield of 4.42%.
  • Current stock price is $46.08, which is relatively stable and shows a potential upside based on analysts' price targets averaging around $55.11.
  • The company has a solid return on equity of 10.44%, indicating effective management and profitability relative to shareholder equity.

Archer-Daniels-Midland Bear Case

Investors should be bearish about investing in Archer-Daniels-Midland Company for these reasons:

  • Revenue for the latest quarter was $21.50 billion, which fell short of analyst estimates of $22.77 billion, suggesting potential challenges in meeting market expectations.
  • The company's revenue decreased by 6.4% compared to the same quarter last year, indicating a decline in sales performance.
  • Several analysts have downgraded their price targets for the stock, with Bank of America lowering its target from $54.00 to $48.00, reflecting a bearish outlook.
  • Two analysts have rated the stock with a sell rating, which may indicate concerns about the company's future performance.
  • The net margin of 2.10% is relatively low, suggesting that the company may face challenges in maintaining profitability amidst rising costs or competitive pressures.

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