Archer Daniels Q1 Earnings Up Y/Y, Revs Fall - Analyst Blog
Archer Daniels Midland Company ( ADM ) began 2014 with mixed first-quarter results. While the company's bottom-line results marked a year-over-year improvement, its revenues were hit hard by a severe winter during the quarter.
The company's adjusted earnings for the quarter surged approximately 19.6% to 55 cents per share from 46 cents posted in the year-ago comparable quarter. The rise came primarily on the back of strong margin improvement at Oilseeds and Corn processing segments, partially offset by weak performance at the Agriculture business.
However, quarterly earnings fell short of the Zacks Consensus Estimate of 76 cents per share. The lower-than-expected bottom line result hit the investor sentiment. Consequently, the stock declined nearly 2.6% during yesterday's trading session.
Further, including certain one-time items, Archer Daniels reported earnings of 40 cents per share as compared with 41 cents in the comparable year-ago quarter.
Archer Daniels' quarterly net sales fell nearly 4.7% year over year to $20,696 million and lagged the Zacks Consensus Estimate of $22,106 million.
Segment-wise, revenues at Archer Daniels' Oilseeds Processing segment fell 4.2% to $7,803 million, Agricultural Services segment's revenues declined 5.0% to $9,974 million and Corn Processing's revenues decreased 7.3% to $2,830 million, all on a year-over-year basis. However, the company's Other segment's revenues increased nearly threefold to $89 million from $31 million in the prior-year quarter.
Q1 Operational Discussion
Archer Daniels reported adjusted segment operating profit of $780 million, marking an improvement of 16.6% from the year-ago quarter on the back of robust performances at the Oilseeds and Corn processing segments. There were partly offset by weak performance at the Agricultural Services segment.
On a segmental basis, the Oilseeds Processing segment recorded an operating profit of $358 million compared with $308 million in the year-ago period. In North America, the company witnessed strong utilization of soybean crushing due to increased meal demand while in South America, good harvest, strong demand and better logistics aided the soybean crushing and origination.
Archer Daniels' Corn Processing segment registered a whopping $64 million increase in operating profit to $261 million from the year-ago quarter. The increase was primarily attributable to strong ethanol margins owing to the robust international demand and lower industry production.
Operating profit for the Agricultural Services segment was flat year over year at $153 million as merchandising and handling as well as milling and other businesses remained weak during the quarter which was fully offset by strong recovery in Transportation business.
Other Business segment posted operating profit of $8 million, down from $13 million reported in the prior-year quarter.
Archer Daniels, which competes with Bunge Limited ( BG ), ended the quarter with $1,083 million in cash and cash equivalents as compared with $1,448 million at the end of the prior-year quarter. At quarter-end, long-term debt including current maturities was $5,373 million, down $1,132 million from a debt of $6,505 million at the end of first quarter 2013. Shareholders' equity as of Mar 31, 2014 was $20,062 million.
During the reported quarter, the company deployed $188 million toward capital expenditure as against $248 million in the first quarter of 2013. Further, Archer Daniels' had a negative free cash flow of $546 million as of Mar 31, 2014, compared with positive $93 million as of Mar 31, 2013.
Moreover, the company returned $333 million to shareholders in the form of share repurchase of worth $175 million and dividend payments of $158 million during the quarter. In the fourth quarter of the previous fiscal, Archer Daniels had laid out a plan to buy back 18 million shares by the end of 2014, as part of its balanced capital allocation strategy. According to this strategy, the company intends to return about $1.4 billion to shareholders in the form of dividends and share repurchases and direct $1.4 billion into the business toward capital spending and small M&As in 2014.
Other Stocks Worth Considering
Archer Daniels currently carries a Zacks Rank #3 (Hold). However, some other better-ranked stocks that are worth a look in the agricultural products industry include The Andersons Inc. ( ANDE ) and Syngenta AG ( SYT ). Both of these have a Zacks Rank #2 (Buy).
ARCHER DANIELS (ADM): Free Stock Analysis Report
ANDERSONS INC (ANDE): Free Stock Analysis Report
BUNGE LTD (BG): Free Stock Analysis Report
SYNGENTA AG-ADR (SYT): Free Stock Analysis Report
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