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Analyst Blog

Shares of Archer Daniels Midland Company (ADM - Analyst Report) touched a new 52-week high of $38.59 on Monday, August 12, and eventually closed trade at $38.56. The stock has been performing well based on the company’s robust quarterly results and impressive inorganic growth initiatives. This specialty retailer has amassed a year-to-date return of 36.1%.

The average volume of shares traded over the last 3 months was approximately 3,520K. Moreover, the company currently trades at a forward P/E of 16.7x, in line with the peer group average. The last traded price is 11.0% above the Zacks Consensus average analyst price target of $34.75. Additionally, the company’s long-term estimated EPS growth rate is 8.7%.

Investors are optimistic about this Zacks Rank #3 (Hold) stock as it reported adjusted earnings of 46 cents per share for second-quarter 2013, that handily surpassed the Zacks Consensus Estimate of 41 cents and surged over 21% from the year-ago comparable quarter’s adjusted earnings of 38 cents. The company’s earnings primarily improved due to robust operating profit at the Corn Processing segment, partially offset by weak performance at its Agricultural Services segment.

We believe that Archer Daniels’ consistent focus on enhancing its processing capabilities and global footprint through strategic acquisitions and joint ventures bode well for future growth. We remain optimistic about the company’s recent attempt to acquire GrainCorp, which will not only enhance its financial position but also help in gaining market share in emerging economies. Nevertheless, we remain slightly anxious about the stock as the price of raw materials may rise in the near term due to decreasing U.S. crop production, which may hurt the company’s margins.

Apart from Archer Daniels, ag stock The Andersons (ANDE) carries a Zacks Rank #2 (Buy).