Archer Daniels Q2 Earnings Miss, Strategic Plans on Track - Analyst Blog

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Archer Daniels Midland Company 's ADM adjusted earnings of 60 cents per share for second-quarter 2015 dipped 24% year over year and also fell short of the Zacks Consensus Estimate of 65 cents. Excluding timing effects, adjusted earnings per share came in at 58 cents.

Archer-Daniels-Midland Company - Earnings Surprise | FindTheBest

On a reported basis, Archer Daniels' earnings of 62 cents fell 23.5% from the year-ago quarter.

Total revenue of $17,186 million fell 20% year over year and lagged the Zacks Consensus Estimate of $19,287 million. Soft revenues resulted from lower sales at all of its operating segments, expect the newly created WILD Flavors and Specialty Ingredients business.

Going by segments, quarterly revenues at Archer Daniels' Agricultural Services segment plunged 24.1% to $7,005 million, the Oilseeds Processing segment's revenues declined 21.4% to $6,822 million, and the Corn Processing segment's revenues descended 19.9% to $2,579 million, all on a year-over-year basis.

On the positive side, revenues at the Wild Flavors and Specialty Ingredients segment witnessed a significant jump of $386 million to $682 million, with other revenues advancing 42% to $98 million in the reported quarter.

Operational Discussion

Archer Daniels reported adjusted segment operating profit of $724 million, down 13.3% from the year-ago quarter. On a GAAP basis, the company's segment operating profit was $808 million compared with $888 million last year.

On a segmental GAAP basis, the Oilseeds Processing segment's operating profit of $344 million jumped $64 million year over year. Strong global soybean crushing results coupled with solid South American origination results led to the upside. This was slightly compensated by lower softseed and refining results.

Archer Daniels' Corn Processing segment registered a $134 million fall in operating profit to $204 million compared with the year-ago quarter figure. The decline is primarily due to lower ethanol industry margins which impacted bioproducts results. This was somewhat negated by improved sweeteners and starches results.

Operating profit for the Agricultural Services segment descended $32 million year over year to $152 million owing to a fall in global grain merchandising and lower earnings due to decrease in North American export margins and volumes, partly offset by record gains from milling operations.

At the newly acquired Wild Flavors and Specialty Ingredients segment, operating profit increased $29 million to $104 million. The improvement is attributed to strong results in North America coupled with an outstanding performance at the specialty proteins business.


Archer Daniels ended the first half of 2015 with $867 million in cash and cash equivalents. At the end of second-quarter 2015, long-term debt including current maturities was $6,766 million. Shareholders' equity as of Jun 30, 2015 was $18,558 million.

During the six months ended Jun 30, Archer Daniels generated $407 million of cash from operating activities.

Apart from this, the company generated strong returns with its trailing 4-quarter average adjusted ROIC reflecting a 120 basis points (bps) improvement from last year. At the end of the quarter, adjusted ROIC was 9%, up 240 bps from the annual WACC of 6.6%.

Moreover, the company returned $1.5 billion to shareholders during the first half of 2015, in the form of share repurchases and dividend payments. In first-half 2015, Archer Daniels bought back about 24 million shares.

Other Developments

Yesterday, Archer Daniels successfully closed the previously announced sale of its global chocolate business to Cargill for about $440 million. This action forms a part of the company's strategy of enhancing shareholder value either through profitable growth or divestiture of unprofitable businesses.

Additionally, other actions that testify the company's progress on its strategic plan include the completion of the Barcarena port transaction with Glencore in June. Going forward, the company remains on track to conclude its Eaststarch transaction and the sale of its global cocoa business, both of which are targeted to be sealed by later this year.

Archer Daniels currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader consumer staples sector include Cal-Maine Foods Inc. CALM , with a Zacks Rank #1 (Strong Buy), SUPERVALU Inc. SVU and Campbell Soup Company CPB , each with a Zacks Rank #2 (Buy).

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ARCHER DANIELS (ADM): Free Stock Analysis Report

SUPERVALU INC (SVU): Free Stock Analysis Report

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CAL-MAINE FOODS (CALM): 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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