Analyst Note| Seth Goldstein, CFA |
Archer Daniels Midland reported strong second-quarter earnings as adjusted segment operating profit was up over 44% year on year as all three segments showed improved profits. We had largely expected higher profits across the board as higher crop prices create favorable grain merchandising conditions for the ag services and oilseeds business, while ethanol and ingredient demand continues to strengthen as COVID-19-related restrictions ease. However, we have increased our outlook for the firm's nutrition business as we think the company's improving portfolio of specialty ingredients will position it for higher growth over the next several years. Having updated our model to reflect these changes, we raise our fair value estimate to $50 per share from $49. Our no-moat rating is unchanged.