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Archer Daniels (ADM) Up 26% YTD: Will the Momentum Continue?
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Archer Daniels Midland Company (ADM - Free Report) has been gaining investors’ confidence, courtesy of its robust strategies that include management of its business portfolio, Project Readiness and cost-savings initiatives as well as a disciplined capital allocation plan. Also, the company’s second-quarter 2018 results marked its third straight positive earnings surprise, with a second consecutive sales beat.
Buoyed by these factors, shares of this Zacks Rank #1 (Strong Buy) company have gained 26.1% year to date, outperforming the industry’s 13.2% rally. Furthermore, it has a VGM Score of A, which raises optimism in the stock.
Strategic Efforts
Archer Daniels actively manages its business portfolio via acquisitions, joint ventures and divestitures that are expected to help in realizing value and invest it in best possible resources to enhance returns. Management has entered into an agreement to acquire certain assets of Brazil-based Algar Agro. Per the terms of the agreement, the company is expected to own the integrated crush along with oil refining or bottling facilities in Uberlandia and Porto Franco. Further, it has agreed to buy Rodelle Inc. to widen its range of vanilla supplies. Earlier, Archer Daniels agreed to acquire France-based Neovia, which provides value-added animal nutrition solutions for the feed industry.
In a bid to streamline its portfolio, the company has undertaken few divestitures, including offloading the Crop Risk Services insurance operations to Validus and the sale of stake in Australian grain handler — Graincorp, among others. Management has also completed the divestiture of its oilseeds operations in Bolivia to Inversiones Piuranas S.A. These acquisitions and divestitures are expected to widen the company’s portfolio and help drive returns.
Furthermore, Archer Daniels’ focus on strengthening its business through increased cost savings forms a key component of its long-term strategy. Over the next five years, it targets $550 million in additional run rate cost savings, including cost savings of $350 million from operational excellence and process enhancements and about $200 million in incremental purchasing savings. In the first six months of 2018, the company generated more than $150 million of operational run rate cost savings, while it progresses well to exceed the $200 million savings target for 2018. It has also been enhancing its operational efficiency at its production and supply chain networks to curtail costs. This apart, the company has been progressing well with its business transformation, under its 1ADM program, which forms an integral part of Project Readiness. Archer Daniels too remains on track with further 1ADM rollouts to cover the entire enterprise in 2018.
Archer Daniels’ efforts to enhance shareholders’ returns through dividend payouts and share buybacks are an added positive. Evidently, the company paid dividends of $379 million to shareholders in the first half of 2018. Also, it declared quarterly dividend of 33.5 cents per share payable Sep 6, 2018. This underscores management’s confidence in Archer Daniels’ prospects and financial strength.
Robust Q2 Numbers & Estimate Revisions
Archer Daniels’ delivered impressive second-quarter 2018 results, wherein the top and bottom line surpassed estimates and improved year over year. While top line gained from solid sales witnessed across all segments, bottom line was aided by higher sales and adjusted segment operating profit along with lower tax rate. The company’s strategic initiatives and cost-saving efforts also boosted the second-quarter performance. Moving ahead, Archer Daniels remains confident about reporting solid results backed by improving market conditions, higher global demand, gains from U.S. tax reform, product innovations and Project Readiness. Going by segments, management expects Origination, Oilseeds and Nutrition results to improve in the third quarter on a year-over-year basis.
However, the company’s Carbohydrate Solutions segment’s results are projected to be lower year over year on weaker results from the ethanol business in the second half of 2018. Nevertheless, the segment witnessed robust starch volumes and dry sweetener margins in the second quarter, which is likely to boost its performance.
Driven by stellar quarterly results and encouraging outlook for the remainder of 2018, analysts are growing bullish on the stock. The Zacks Consensus Estimate of $3.41 for 2018 and $3.52 for 2019 has moved up 9.6% and 10%, respectively, in the past 30 days. Also, the consensus estimate of 77 cents for the third quarter increased 16.7% in the same time frame.
Bottom Line
Given these afore-mentioned solid strategies coupled with impressive quarterly performance and robust outlook for the back half of 2018, we believe Archer Daniels to continue with this stellar show.
Want More of Solid Consumer Staples Stocks? Check These
Calyxt, Inc. pulled off a positive earnings surprise of 7.4% in the last reported quarter. The company carries a Zacks Rank #2 (Buy).
The Boston Beer Company, Inc. (SAM - Free Report) , also a Zacks Rank #2 stock, delivered an average positive earnings surprise of 14.2% in the trailing four quarters.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Archer Daniels (ADM) Up 26% YTD: Will the Momentum Continue?
Archer Daniels Midland Company (ADM - Free Report) has been gaining investors’ confidence, courtesy of its robust strategies that include management of its business portfolio, Project Readiness and cost-savings initiatives as well as a disciplined capital allocation plan. Also, the company’s second-quarter 2018 results marked its third straight positive earnings surprise, with a second consecutive sales beat.
Buoyed by these factors, shares of this Zacks Rank #1 (Strong Buy) company have gained 26.1% year to date, outperforming the industry’s 13.2% rally. Furthermore, it has a VGM Score of A, which raises optimism in the stock.
Strategic Efforts
Archer Daniels actively manages its business portfolio via acquisitions, joint ventures and divestitures that are expected to help in realizing value and invest it in best possible resources to enhance returns. Management has entered into an agreement to acquire certain assets of Brazil-based Algar Agro. Per the terms of the agreement, the company is expected to own the integrated crush along with oil refining or bottling facilities in Uberlandia and Porto Franco. Further, it has agreed to buy Rodelle Inc. to widen its range of vanilla supplies. Earlier, Archer Daniels agreed to acquire France-based Neovia, which provides value-added animal nutrition solutions for the feed industry.
In a bid to streamline its portfolio, the company has undertaken few divestitures, including offloading the Crop Risk Services insurance operations to Validus and the sale of stake in Australian grain handler — Graincorp, among others. Management has also completed the divestiture of its oilseeds operations in Bolivia to Inversiones Piuranas S.A. These acquisitions and divestitures are expected to widen the company’s portfolio and help drive returns.
Furthermore, Archer Daniels’ focus on strengthening its business through increased cost savings forms a key component of its long-term strategy. Over the next five years, it targets $550 million in additional run rate cost savings, including cost savings of $350 million from operational excellence and process enhancements and about $200 million in incremental purchasing savings. In the first six months of 2018, the company generated more than $150 million of operational run rate cost savings, while it progresses well to exceed the $200 million savings target for 2018. It has also been enhancing its operational efficiency at its production and supply chain networks to curtail costs. This apart, the company has been progressing well with its business transformation, under its 1ADM program, which forms an integral part of Project Readiness. Archer Daniels too remains on track with further 1ADM rollouts to cover the entire enterprise in 2018.
Archer Daniels’ efforts to enhance shareholders’ returns through dividend payouts and share buybacks are an added positive. Evidently, the company paid dividends of $379 million to shareholders in the first half of 2018. Also, it declared quarterly dividend of 33.5 cents per share payable Sep 6, 2018. This underscores management’s confidence in Archer Daniels’ prospects and financial strength.
Robust Q2 Numbers & Estimate Revisions
Archer Daniels’ delivered impressive second-quarter 2018 results, wherein the top and bottom line surpassed estimates and improved year over year. While top line gained from solid sales witnessed across all segments, bottom line was aided by higher sales and adjusted segment operating profit along with lower tax rate. The company’s strategic initiatives and cost-saving efforts also boosted the second-quarter performance. Moving ahead, Archer Daniels remains confident about reporting solid results backed by improving market conditions, higher global demand, gains from U.S. tax reform, product innovations and Project Readiness. Going by segments, management expects Origination, Oilseeds and Nutrition results to improve in the third quarter on a year-over-year basis.
However, the company’s Carbohydrate Solutions segment’s results are projected to be lower year over year on weaker results from the ethanol business in the second half of 2018. Nevertheless, the segment witnessed robust starch volumes and dry sweetener margins in the second quarter, which is likely to boost its performance.
Driven by stellar quarterly results and encouraging outlook for the remainder of 2018, analysts are growing bullish on the stock. The Zacks Consensus Estimate of $3.41 for 2018 and $3.52 for 2019 has moved up 9.6% and 10%, respectively, in the past 30 days. Also, the consensus estimate of 77 cents for the third quarter increased 16.7% in the same time frame.
Bottom Line
Given these afore-mentioned solid strategies coupled with impressive quarterly performance and robust outlook for the back half of 2018, we believe Archer Daniels to continue with this stellar show.
Want More of Solid Consumer Staples Stocks? Check These
Medifast, Inc. (MED - Free Report) has a long-term earnings growth rate of 20%. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Calyxt, Inc. pulled off a positive earnings surprise of 7.4% in the last reported quarter. The company carries a Zacks Rank #2 (Buy).
The Boston Beer Company, Inc. (SAM - Free Report) , also a Zacks Rank #2 stock, delivered an average positive earnings surprise of 14.2% in the trailing four quarters.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>