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


Archer-Daniels posted better-than-expected third-quarter 2014 earnings, backed by strong ethanol demand, improvement in the U.S. grain export volumes and stringent cost-containment efforts. Archer-Daniels' consistent focus on enhancing its processing capabilities and global footprint through strategic acquisitions bode well for future growth. Moreover, we are encouraged by its strong cash flow generation ability and capital allocation strategies which help it to make investments toward the development of business while using the excess cash to enhance shareholder returns. However, significant presence in the international market exposes the company to unfavorable foreign currency translations and economic and political instability. The company also remains sensitive to rising commodity prices. Hence, we downgraded our Outperform recommendation to Neutral on the stock.


Archer-Daniels-Midland Company 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 IL-based company reports its operating results under four segments:

The Agricultural Services division (40% of total revenue for 3Q14) 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 raw materials for the agricultural processing industry.

The Oilseeds processing division (43% 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.

The Corn processing segment (16% 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.

The Other segment (1% of total revenue) primarily includes the company's financial business units. However, the segment makes negligible contribution to the company's revenues.

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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.

This article appears in: Investing , Stocks

Referenced Stocks: ADM

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