Archer Daniels Midland Company
) inched up 1.7% since the company announced new developments to
its existing portfolio management on Apr 15, 2014. These
strategies are expected to help the company in realizing value
from its businesses and investing the same in best possible
resources to enhance returns.
Firstly, on witnessing lower-than-expected returns from its South
American fertilizer business, the company decided to vend these
operations by entering into an agreement with
The Mosaic Company
), post which ADM will be entitled to purchase fertilizers from
Mosaic and will supply fertilizers to certain customers in Brazil
and Paraguay. The move is expected to augment the company's
returns and help maintain amicable relationships with
In a separate issue, the company stated that after several failed
attempts to sell its chocolate and cocoa business, it has hired
advisors to facilitate the sale of its chocolate business. ADM
also decided to retain the cocoa press assets as this industry is
picking momentum due to improvement in crop supplies. Therefore,
the company believes this move will enable it to meet its return
Finally, in an effort to enhance its global origination network
and serve customers better, Archer Daniels has bought the
remaining 20% stake of Alfred C. Toepfer International for
approximately $115 million. Toepfer has offices in the Americas,
Africa, Asia, Australia and Europe and has thereby facilitated
Archer Daniels to increase its global reach.
Propelled by these initiatives, this world's largest corn
producer hit a 52-week high of $45.02 on the last trading day,
thereby amassing a year-over-year return of 42.9%. Year-to-date,
the company's shares climbed 5.3%.
Moreover, ADM currently trades at a forward P/E of 14.1x, a 6.1%
discount to the peer group average of 15.01x, leaving room for
further upside potential. This, along with the above mentioned
developments, instills confidence among investors and makes them
constructive on this Zacks Rank #3 (Hold) stock.
Going forward, we expect Archer Daniels Midland's consistent
focus on enhancing processing capabilities and increasing its
global footprint to drive growth. The company intends to invest
around $1.4 billion in capital projects in 2014, the majority of
which will be in high-growth markets outside the U.S, further
underscoring its growth prospects.
Apart from Archer Daniels,
Anheuser-Busch InBev SA/NV
) hit 52-week highs of $109.25 and $67.40, respectively on Apr
ARCHER DANIELS (ADM): Free Stock Analysis
ANHEUSER-BU ADR (BUD): Free Stock Analysis
COLGATE PALMOLI (CL): Free Stock Analysis
MOSAIC CO/THE (MOS): Free Stock Analysis
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