Company Reports

We're maintaining our $60 fair value estimate following Archer-Daniels Midland's fourth-quarter results. Our no moat rating is also unchanged. ADM reported fourth-quarter earnings far later than usual, as the company was reviewing its accounting practices for intersegment sales related to the nutrition business. When ADM announced it was reviewing the nutrition business financials, we estimated that 2023 nutrition profits would decline by over 40%. Management reported a 42% decline in 2023 versus the restated 2022 profits. While ADM is still under investigation from the US Securities and Exchange Commission and the US Department of Justice and could face fines, we think the bulk of the impact, adjusted in the restated financial statements, is likely complete.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland, or ADM, announced its nutrition business is under investigation for potentially overstating its revenue and profits. In addition to the announcement, ADM also announced reduced guidance due to lower results in the nutrition business, which generated 11% of profits in 2022. Currently, none of the company's other businesses are involved in the investigation. Based on ADM's 2023 adjusted earnings per share guidance cut to at least $6.90, we estimate over a 40% profit decline in 2023 versus the 2022 stated financials. However, prior nutrition business financial statements could also be restated.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland's third-quarter results exemplified our long-term view that the company's ag services and oilseeds business, which generates the majority of profits, will see lower results as falling crop prices lead to more normalized grain merchandising and oilseed crushing conditions. Having updated our model to incorporate ADM's third-quarter results, we maintain our $70 per share fair value estimate for ADM.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

After updating our model to incorporate Archer-Daniels Midland's second-quarter results, we maintain our $70 per share fair value estimate. Our no-moat rating is also unchanged.

After incorporating Archer Daniels-Midland's first-quarter results into our valuation model, we maintain our $70 per share fair value estimate. Our no moat rating is also unchanged.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

We maintain our $70 per share fair value estimate for Archer-Daniels Midland after updating our model to incorporate the company's fourth-quarter results. Our no-moat rating is also unchanged.

After updating our model to incorporate Archer-Daniels Midland's third-quarter results, we raise our fair value estimate to $70 per share from $67. Our no-moat rating is unchanged. The primary driver of our fair value estimate increase is our improved near-term outlook as we expect grain merchandising conditions will remain favorable for the rest of 2022 and into 2023. Accordingly, we have raised our near-term outlook for its ag services and oil seeds business, which generates the majority of companywide profits.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.

Archer-Daniels Midland reported strong second-quarter results as adjusted segment operating profit was up nearly 60% year over year. While profits increased across all segments versus the prior year's quarter, the majority of growth was driven by the ag services and oilseeds business. During the quarter, this business benefitted from favorable grain merchandising conditions and higher soy crush margins. As a result of the strong quarter, we have raised our forecast for the year to incorporate higher profits that we had previously forecast.

On May 18, fertilizer and grain merchandiser stocks under our coverage generally fell more than the broader market decline on the news of the United Nations' plan to facilitate grain and fertilizer exports from Russia, Ukraine, and Belarus. Since the Russia-Ukraine conflict began, Russia and Belarus have exported limited fertilizer, while Russia and Ukraine have stopped grain exports. With the U.S. backing the UN's plan, we think the exports will likely resume later this year for both grains and fertilizers. In turn, this will reduce the impact of the supply shocks that have led to multiyear high grain prices and record high fertilizer prices.

Archer-Daniels Midland reported strong first-quarter earnings as segment operating profit was up 28% versus the prior-year quarter. The growth was driven by higher results in all segments. We have increased our near-term outlook for the firm in all three segments, as we now forecast stronger revenue growth and higher profitability. Our long-term outlook remains intact. Having updated our model to reflect these changes, we raise our fair value estimate to $65 per share from $55. Our no-moat rating is unchanged.

Archer-Daniels Midland buys, processes, and sells agricultural commodities. The firm purchases crops from farmers and then transports, stores, and/or processes the crops before selling them to food, feed, and energy buyers. The commodity products ADM moves around the world are readily available from competitors, and the company has little pricing power over the products it buys and sells, making for slim margins. In addition, the capital intensity of its operations makes it difficult, but not impossible, for ADM to generate economic profits.