Archer Daniels Midland Company (ADM): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Based on better-than-expected bottom-line results for fourth-quarter 2013, we have upgraded our long-term recommendation on Archer Daniels to Outperform. The company's fourth-quarter results gained from robust operating performance at its Corn and Oilseeds Processing businesses, partly offset by lower profits at the Agricultural Services segment. We believe that Archer Daniels' consistent focus on enhancing its processing capabilities and global footprint through strategic acquisitions and joint ventures bode well for future growth. Furthermore, Archer Daniels' margins are expected to improve in 2014 due to robust global farm production, which will subsequently lower the prices of agricultural products. In addition, we are encouraged by the company's strong cash flow generation ability, which enables it to make investments to develop business while using the excess cash to enhance shareholder returns through dividend payouts and share buybacks.

Overview:

Archer Daniels Midland Co. is one of the leading food processing companies in the world. The company processes oilseeds, corn, wheat, cocoa, and other feedstuffs, and is one of the leading manufacturers of vegetable oil, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. Archer Daniels also has a worldwide grain elevator and transportation network for procurement, storage, cleansing and transportation of agricultural commodities. The Illinois-based company reports its operating results under three segments:

Agricultural Services division (46% of total revenue for fiscal 2013) includes operations related to the company's grain elevator and transportation network in the U.S. to buy, store, clean, and transport agricultural commodities and resell them primarily as animal feed and as raw materials for the agricultural processing industry.

Oilseeds processing division (39% of total revenue) is engaged in the processing of soybeans, cottonseed, sunflower seeds, canola, rapeseed, peanuts, and flaxseed into vegetable oils and protein meals in North America, Europe, South America and Asia principally for food and feed industries.

Corn processing segment (15% of total revenue) produces a number of products for the food and beverage industries, including syrup, starch, glucose, dextrose, and sweeteners. It is also engaged in the production of ethanol, amino acid, citric acid, lactic acid, lactates, sorbitol and xanthan gum for various industries.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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