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Archer Daniels Midland Co

by Todd Bunton

September 29, 2010 | Comments : 0 Recommended this article: (0)
ADM

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Archer Daniels Midland ( ADM - Analyst Report ) reported fourth quarter earnings per share of 69 cents, crushing the Zacks Consensus Estimate by 38%. Shares are trading near their 52-week high and analysts have raised their estimates significantly higher following the strong quarter.

About ADM

Odds are that something you've eaten today was made with at least one ingredient that came from ADM. Cereals, sodas, juices, candy, dairy, meat - ADM provides ingredients for all of these.

The Decatur, Illinois based firm operates in three main segments: Oilseeds Processing, Corn Processing, and Agricultural Services. Revenues were divided as follows:

Oilseeds Processing: 43%
Corn Processing: 13%
Agricultural Services: 36%
Other: 8%

Total processing volumes increased 7.0% from the same quarter in 2009, driven by 17.7% growth in corn processing. Despite the volume increase, net sales declined 5.0% due in large part to lower commodity prices.

Profit Margins Expanding

Gross profit for the quarter improved from 2.2% to 5.9%.

Operating profit in its oilseeds processing division increased 58% from the same quarter in 2009. Its corn processing and agricultural services divisions both went from negative profitability in Q4'09 to solid profitability in 2010.

For the full year, earnings per share was $3.00, up 15% from $2.62 in 2009.

Outlook

The Zacks Consensus Estimate for 2011 is $3.10, representing 3% annual growth. The 2012 estimate is $3.29, up 6% from 2011 EPS.

Income

ADM has had a long history of raising its dividend. Since 2000 the company has increased it at an annual rate of 12.6%. Check out the chart below:

ADM: Archer Daniels Midland Company

It currently yields 1.8%.

Fundamentals

Shares recently traded at 10.5x 2011 earnings, a discount to the industry average of 15.3x. Its PEG ratio is attractive at 1.0.

The price to book ratio of 1.4 is also well below the industry average of 2.8.

Archer Daniels Midland recently became a Zacks #2 Rank (Buy) stock.

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