On Monday, Barclays (LON:BARC) reiterated its Overweight rating on shares of Archer Daniels Midland (NYSE:ADM) with a consistent price target of $60.00. The firm adjusted its model for the company, maintaining the sales forecast while revising down profitability expectations.
The analyst cited a decrease in operating income projections by 13% to $1 billion. This adjustment is primarily due to a significant dip in Other/Corporate profits, influenced by an insurance payout linked to operational interruptions at the Decatur East plant.
Archer Daniels Midland is scheduled to announce its earnings results on Tuesday, November 5, followed by a conference call at 9 am ET. The firm's Nutrition segment is expected to see a positive impact of $50 million, a 22% increase in operating profit year-over-year. Additionally, the company's other two segments are each projected to benefit from an approximate $25 million boost.
Despite these gains, the analyst anticipates a year-over-year decline in profitability due to a challenging operating environment. The Ag Services & Oilseeds (AS&O) outlook has been reduced by 9%, and the Carbohydrate Solutions estimate has been cut by 7%, reflecting struggles in the wheat milling market.
The decrease in segment profits is expected to be partially offset by improved financing costs and a better tax rate. Consequently, the analyst has updated the earnings per share (EPS) estimate to $1.20, down from the previous $1.43 prediction. Archer Daniels Midland's forthcoming earnings report and conference call will provide further details on the company's financial performance and outlook.
In other recent news, Archer-Daniels-Midland Co (ADM) faces a lawsuit over alleged safety failures at their Decatur, Illinois facility, resulting in severe worker injuries.
Meanwhile, Citi has maintained a Neutral rating on ADM stock with a $62 price target, anticipating third-quarter earnings for 2024 to be announced soon. The brokerage firm expects a sequential rise in ADM's earnings in the fourth quarter, specifically in the Agricultural Services & Oilseeds segment.
ADM has also announced the temporary shutdown of its sole soybean processing facility in Iowa, a move that could tighten the supply of soymeal. Furthermore, the company declared a cash dividend of 50 cents per share, marking its 371st consecutive quarterly dividend, reflecting its commitment to shareholder value.
Recent developments also indicate that ADM and Bunge (NYSE:BG) Ltd may benefit from a surge in crop sales by U.S. farmers, primarily corn and soybeans harvested in 2023. This could provide cheaper soybean ownership for ADM and aid in using excess manufacturing capacity.
These are some of the recent developments in ADM's operations.
InvestingPro Insights
As Archer Daniels Midland (NYSE:ADM) prepares to announce its earnings, InvestingPro data offers additional context to the Barclays analysis. ADM's P/E ratio stands at 11.24, indicating the stock may be undervalued relative to its earnings. This aligns with an InvestingPro Tip suggesting that ADM is "trading at a low earnings multiple," which could be attractive to value investors despite the anticipated profitability decline.
The company's dividend yield of 3.54% and an InvestingPro Tip highlighting that ADM "has raised its dividend for 49 consecutive years" underscore its commitment to shareholder returns. This consistent dividend growth may provide some stability for investors during the challenging operating environment mentioned in the article.
InvestingPro offers 12 additional tips for ADM, providing a more comprehensive analysis for investors looking to deepen their understanding of the company's financial position and market performance.
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