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Archer Daniels (ADM) Rises 5% in 3 Months: Is More Upside Left?
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Archer Daniels Midland Company (ADM - Free Report) looks well-positioned on the back of solid demand, improved productivity and product innovations. Persistent growth in the Nutrition segment bodes well.
This led to a robust earnings surprise trend, which continued in third-quarter 2022. The top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. This marked the 13th straight quarter of an earnings beat.
Revenues advanced 21.4% year over year to $24,683 million, driven by solid sales across all segments. Adjusted earnings of $1.86 per share in the third quarter surged 91.8% from 97 cents in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.83 per share, up 96.8% from the prior-year quarter’s $1.26.
The company reported an adjusted segmental operating profit of $1,579 million in third-quarter 2022, up 57.6% from the year-ago quarter.
Consequently, shares of this Zacks Rank #1 (Strong Buy) company have gained 5% in the past three months against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
That said, let’s delve deeper into the factors aiding ADM.
Factors Narrating ADM’s Growth Story
Archer Daniels is gaining from the robust performance in its Nutrition segment. In third-quarter 2022, revenues in the segment rose 9.8% year over year. The segment’s adjusted operating profit grew 0.6% year over year, owing to significant gains in the Human Nutrition units.
The Human Nutrition unit gained from solid demand for plant-based proteins, a robust performance in texturants and strength in Specialty Ingredients. The Flavors unit gained from robust demand growth in EMEA. Management expects the segment to witness year-over-year growth in fourth-quarter 2022, driven by continued demand in Human Nutrition, which is likely to more than offset currency headwinds. Also, the Nutrition segment is predicted to grow 15-20% in operating profit on a cc basis in 2022.
In response to growing trends for all things sustainable, Archer Daniels has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is a plant-based product.
Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets.
Such endeavors are likely to help the company to attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low-carbon, sustainable aviation fuel. It also shut down its ethanol facility in Peoria last October. The company is utilizing innovative technologies to develop products and boost operating capabilities.
The company is on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As part of readiness efforts, it introduced a company-wide simplification initiative.
The company’s strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
Wrapping Up
Although inflationary pressures and elevated costs are concerning, we hope that strength in its nutrition unit, product innovation and solid demand will help sustain its momentum. Topping it, a long-term earnings growth rate of 7.2% and a VGM Score of A drive optimism.
e.l.f. Beauty currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial year’s sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the year-ago reported figures.
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Archer Daniels (ADM) Rises 5% in 3 Months: Is More Upside Left?
Archer Daniels Midland Company (ADM - Free Report) looks well-positioned on the back of solid demand, improved productivity and product innovations. Persistent growth in the Nutrition segment bodes well.
This led to a robust earnings surprise trend, which continued in third-quarter 2022. The top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. This marked the 13th straight quarter of an earnings beat.
Revenues advanced 21.4% year over year to $24,683 million, driven by solid sales across all segments. Adjusted earnings of $1.86 per share in the third quarter surged 91.8% from 97 cents in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.83 per share, up 96.8% from the prior-year quarter’s $1.26.
The company reported an adjusted segmental operating profit of $1,579 million in third-quarter 2022, up 57.6% from the year-ago quarter.
Consequently, shares of this Zacks Rank #1 (Strong Buy) company have gained 5% in the past three months against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
That said, let’s delve deeper into the factors aiding ADM.
Factors Narrating ADM’s Growth Story
Archer Daniels is gaining from the robust performance in its Nutrition segment. In third-quarter 2022, revenues in the segment rose 9.8% year over year. The segment’s adjusted operating profit grew 0.6% year over year, owing to significant gains in the Human Nutrition units.
The Human Nutrition unit gained from solid demand for plant-based proteins, a robust performance in texturants and strength in Specialty Ingredients. The Flavors unit gained from robust demand growth in EMEA. Management expects the segment to witness year-over-year growth in fourth-quarter 2022, driven by continued demand in Human Nutrition, which is likely to more than offset currency headwinds. Also, the Nutrition segment is predicted to grow 15-20% in operating profit on a cc basis in 2022.
In response to growing trends for all things sustainable, Archer Daniels has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is a plant-based product.
Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets.
Such endeavors are likely to help the company to attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low-carbon, sustainable aviation fuel. It also shut down its ethanol facility in Peoria last October. The company is utilizing innovative technologies to develop products and boost operating capabilities.
The company is on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As part of readiness efforts, it introduced a company-wide simplification initiative.
The company’s strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
Wrapping Up
Although inflationary pressures and elevated costs are concerning, we hope that strength in its nutrition unit, product innovation and solid demand will help sustain its momentum. Topping it, a long-term earnings growth rate of 7.2% and a VGM Score of A drive optimism.
Other Stocks to Consider
Here are some other top-ranked stocks from the broader Consumer Staples space, namely e.l.f. Beauty (ELF - Free Report) , Conagra Brands (CAG - Free Report) and Campbell Soup (CPB - Free Report)
e.l.f. Beauty currently sports a Zacks Rank of 1. ELF has a trailing four-quarter earnings surprise of 77%, on average. The stock has rallied 29% in the past three months.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for e.l.f. Beauty’s current financial year’s sales and earnings suggests growth of 17.6% and 8.3%, respectively, from the prior-year reported numbers. The consensus mark for ELF’s earnings per share has moved up a penny in the past seven days.
Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank of 2 (Buy). CAG has a trailing four-quarter earnings surprise of 1.8%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current financial year’s sales and earnings suggests growth of 5.2% and 3.4%, respectively, from the year-ago reported figures.
Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank of 2. CPB has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Campbell Soup’s current financial year’s sales and earnings suggests growth of 8.2% and 4.9%, respectively, from the year-ago reported figures.