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Archer Daniels (ADM) to Post Q4 Earnings: What's in Store?

Leading food processing company Archer Daniels Midland CompanyADM is slated to report fourth-quarter 2016 results on Feb 7. Last quarter, the company delivered a positive earnings surprise of 25.5%, breaking its negative surprise trend. Let's see how things are shaping up for this announcement.

Archer-Daniels-Midland Company Price and EPS Surprise

Archer-Daniels-Midland Company Price and EPS Surprise | Archer-Daniels-Midland Company Quote

Factors Influencing This Quarter

Archer Daniels has outperformed the broader Consumer Staples sector in the last one year, as its shares grew 29.5% in comparison with the sector's 5.1% rise over this time frame. The company has mainly been benefitting from its cost-saving initiatives, and increase in processing capabilities and global footprint through strategic acquisitions. Courtesy of its cost-control measures, the company remains on track to save $275 million by the end of the calendar year. Further, citing improved market conditions and higher U.S. harvest, along with solid execution capabilities, the company remains confident of delivering solid results for fourth-quarter 2016 and 2017.

However, Archer Daniels' sales were soft in the last quarter mainly due to weakness in the Corn Processing and Oilseeds Processing segments. Despite topping estimates, earnings declined year over year due to sluggish sales and lower operating profit. Though management's outlook for the upcoming quarter looks encouraging, the company's global market presence keeps it exposed to the risk of adverse currency movements.

The Zacks Consensus Estimate for 2016 decreased by 3 cents to $2.25 over the past seven days. The Zacks Consensus Estimate of 82 cents for fourth-quarter 2016 declined by 2 cents over the same time frame. Given the mixed signals, we would prefer to wait and see if Archer Daniel's solid growth endeavors can help it counter these hurdles and position it for another surprise.

Earnings Whispers

Our proven model does not conclusively show that Archer Daniels is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: Archer Daniels currently has an Earnings ESP of -6.10%. This is because the Most Accurate estimate of 77 cents stands below the Zacks Consensus Estimate of 82 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Archer Daniels' Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Campbell Soup Company CPB , expected to release earnings on Feb 23, currently has an Earnings ESP of +1.15% and a Zacks Rank #2.You can see the complete list of today's Zacks #1 Rank stocks here .

Yum Brands Inc. YUM , slated to release earnings on Feb 8, currently has an Earnings ESP of +2.82% and a Zacks Rank #3.

The Clorox Company CLX , scheduled to report earnings on Feb 3, currently has an Earnings ESP of +0.82% and a Zacks Rank #3.

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Campbell Soup Company (CPB): Free Stock Analysis Report

Yum! Brands, Inc. (YUM): Free Stock Analysis Report

Clorox Company (The) (CLX): Free Stock Analysis Report

Archer-Daniels-Midland Company (ADM): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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