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ADM Beats, but Revenue Slumps

ADM BG

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Leading food processing company Archer Daniels Midland Company’s (ADM - Analyst Report) third-quarter 2012 earnings per share of 78 cents beat the Zacks Consensus Estimate of 60 cents and was down 12% from the year-ago earnings of 89 cents per share. The increase was mainly driven by better performance at its Corn Processing and Agricultural Services segments.

On a year-over-year basis, earnings declined due to weak margins, particularly in ethanol and European oilseeds; and lower segment operating profit, slightly offset by lower corporate expenses.

On a reported basis, including a LIFO charge of 10 cents, restructuring costs of 8 cents and other adjustments, quarterly earnings were down roughly 31% to 60 cents per share from the prior-period earnings of 86 cents per share.

Quarterly Details

Archer Daniels' quarterly net sales surged 5.4% year over year to $21,155 million, but below the Zacks Consensus Estimate of $21,333 million. The year-over-year growth in net sales was mainly attributable to a 15.1% increase in Corn Processing revenues to $2,835 million and 14.4% rise in Oilseeds Processing revenues to $7,044 million, marginally offset by a 0.5% decline in Agricultural Services to $9,825 million.

The company reported total segment operating profit of $887 million, down 12% from the year-ago quarter.

On a segmental basis, operating profit for Agricultural Services segment increased $8 million to $179 million due to good volumes and margins at ADM’s Black Sea and other international merchandising operations and increased earnings from transportation services, offset by lower U.S. export volumes and flat Merchandising and handling earnings.

Archer Daniels' Corn Processing segment's operating profit reflected a fall of $74 million to $130 million in the third quarter. The decline was attributed to better sweeteners and starches operating profit more than offset by weak ethanol margins.

Oilseeds Processing segment recorded third-quarter operating profit of $395 million compared with an operating profit of $512 million in the year-ago period. The $117 million decline was primarily due to the continued global weakness in oilseeds processing margins.

Operating profit from the other business segment came in at $183 million, up $64 million from last year.

Archer Daniels, which competes with Bunge Limited (BG - Snapshot Report) and Corn Products International Inc. , currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Underperform recommendation.

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