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Archer Daniels' (ADM) Q3 Earnings Beat Estimates, Sales Lag
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Archer Daniels Midland Company (ADM - Free Report) reports third-quarter 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate while sales lagged the same. Amid the ongoing COVID-19 crisis, results gained from the Readiness program, positive cash flow and solid performance at the Nutrition unit. Notably, the company reported fifth consecutive quarter of operating profit growth of more than 20% year over year for the Nutrition segment.
Going ahead, the company remains on track with its Strive 35 sustainability goals, probiotics expansion as reflected in the new state-of-the-art facility in Valencia and collaboration with Spiber in a bid to produce plant-based polymers. Driven by these plans, management foresees a sturdy fourth quarter and sustained momentum for 2021.
Adjusted earnings of 89 cents per share in the third quarter rose 15.6% from the year-ago quarter and outpaced the Zacks Consensus Estimate of 71 cents. On a reported basis, the company’s earnings were 40 cents per share, down 44.4% from the prior-year quarter’s 72 cents.
Revenues declined 9.6% year over year to $15,126 million and missed the Zacks Consensus Estimate of $16,783 million. Drab sales across all segments weighed on the top line.
Segment-wise, revenues for the Nutrition, Carbohydrate Solutions and the Ag Services & Oilseeds segments declined 0.4%, 19.5% and 8.6% year over year to $1,451 million, $2,064 million and $11,527 million, respectively.
Gross profit fell 3.3% year over year to $1,042 million, while gross margin expanded 50 basis points (bps) to 6.9% in the quarter under review. SG&A expenses rose 10% to $636 million.
Moreover, Archer Daniels reported adjusted segment operating profit of $849 million in third-quarter 2020, up 11.1% from the year-ago quarter. On a GAAP basis, the company’s segmental operating profits improved nearly 19.3% year over year to $904 million.
Archer Daniels Midland Company Price, Consensus and EPS Surprise
Adjusted operating profit at Ag Services & Oilseeds increased 4.6% year over year to $436 million. Operating results gained from solid performance in North America, driven by higher volumes and improved margins. On the flip side, a slow-selling season for Brazilian farmers as compared to the first half of 2020 led to sluggishness in South America. Also, unfavorable timing acted as a deterrent.
Despite improved margins in North and South America on the back of healthy demand for meal and oil, the crushing business was drab year over year due to soft margins in EMEAI. Operating results for Refined Products and Other improved year over year, driven by solid margins in biodiesel across the globe and robust performance in Packaged oils in South America.
The Carbohydrate Solutions segment’s adjusted operating profit grew 35.2% to $246 million owing to a higher demand for Starches in North America along with advanced wet mill ethanol margins stemming from a balance in supply and demand of the ethanol industry. Also, the unit gained from reduced net corn expenses and risk control measures. Apart from these, sturdy demand and lower input costs contributed to segment growth. Meanwhile, Vantage Corn Processors performed well year over year on the back of improved industry ethanol margins as well as higher volumes and margins of USP-grade industrial alcohol for hand sanitizers.
In the Nutrition segment, adjusted operating profit of $147 million rallied 24.6% from $118 million in the year-ago quarter owing to significant gains in Human and Animal Nutrition units. The Human Nutrition division gained from its diversified portfolio and higher sales of North America flavors. The Animal Nutrition unit witnessed sustained growth in the quarter under review, driven by a solid performance from Neovia, strong demand for amino acids and sturdy sales in pet care, which were somewhat offset by soft demand for aquaculture feed and currency headwinds.
Other Financials
Archer Daniels ended the quarter with cash and cash equivalents of $948 million, long-term debt, including current maturities, of $7,924 million and shareholders’ equity of $19,341 million.
In the nine months ending Sep 30, 2020, the company used $1,516 million in cash for operating activities. Additionally, it bought back shares of $117 million and paid out dividends of $607 million in the said period.
Price Performance
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 16.5% compared with the industry’s 11.6% growth.
Procter Gamble Company (PG - Free Report) has a long-term earnings growth rate of 7.6%. The stock presently carries a Zacks Rank #2.
General Mills, Inc. (GIS - Free Report) , with a long-term earnings growth rate of 7.5%, currently carries a Zacks Rank #2.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
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Archer Daniels' (ADM) Q3 Earnings Beat Estimates, Sales Lag
Archer Daniels Midland Company (ADM - Free Report) reports third-quarter 2020 results, wherein the bottom line surpassed the Zacks Consensus Estimate while sales lagged the same. Amid the ongoing COVID-19 crisis, results gained from the Readiness program, positive cash flow and solid performance at the Nutrition unit. Notably, the company reported fifth consecutive quarter of operating profit growth of more than 20% year over year for the Nutrition segment.
Going ahead, the company remains on track with its Strive 35 sustainability goals, probiotics expansion as reflected in the new state-of-the-art facility in Valencia and collaboration with Spiber in a bid to produce plant-based polymers. Driven by these plans, management foresees a sturdy fourth quarter and sustained momentum for 2021.
Adjusted earnings of 89 cents per share in the third quarter rose 15.6% from the year-ago quarter and outpaced the Zacks Consensus Estimate of 71 cents. On a reported basis, the company’s earnings were 40 cents per share, down 44.4% from the prior-year quarter’s 72 cents.
Revenues declined 9.6% year over year to $15,126 million and missed the Zacks Consensus Estimate of $16,783 million. Drab sales across all segments weighed on the top line.
Segment-wise, revenues for the Nutrition, Carbohydrate Solutions and the Ag Services & Oilseeds segments declined 0.4%, 19.5% and 8.6% year over year to $1,451 million, $2,064 million and $11,527 million, respectively.
Gross profit fell 3.3% year over year to $1,042 million, while gross margin expanded 50 basis points (bps) to 6.9% in the quarter under review. SG&A expenses rose 10% to $636 million.
Moreover, Archer Daniels reported adjusted segment operating profit of $849 million in third-quarter 2020, up 11.1% from the year-ago quarter. On a GAAP basis, the company’s segmental operating profits improved nearly 19.3% year over year to $904 million.
Archer Daniels Midland Company Price, Consensus and EPS Surprise
Archer Daniels Midland Company price-consensus-eps-surprise-chart | Archer Daniels Midland Company Quote
Segment Operating Profit Discussion
Adjusted operating profit at Ag Services & Oilseeds increased 4.6% year over year to $436 million. Operating results gained from solid performance in North America, driven by higher volumes and improved margins. On the flip side, a slow-selling season for Brazilian farmers as compared to the first half of 2020 led to sluggishness in South America. Also, unfavorable timing acted as a deterrent.
Despite improved margins in North and South America on the back of healthy demand for meal and oil, the crushing business was drab year over year due to soft margins in EMEAI. Operating results for Refined Products and Other improved year over year, driven by solid margins in biodiesel across the globe and robust performance in Packaged oils in South America.
The Carbohydrate Solutions segment’s adjusted operating profit grew 35.2% to $246 million owing to a higher demand for Starches in North America along with advanced wet mill ethanol margins stemming from a balance in supply and demand of the ethanol industry. Also, the unit gained from reduced net corn expenses and risk control measures. Apart from these, sturdy demand and lower input costs contributed to segment growth. Meanwhile, Vantage Corn Processors performed well year over year on the back of improved industry ethanol margins as well as higher volumes and margins of USP-grade industrial alcohol for hand sanitizers.
In the Nutrition segment, adjusted operating profit of $147 million rallied 24.6% from $118 million in the year-ago quarter owing to significant gains in Human and Animal Nutrition units. The Human Nutrition division gained from its diversified portfolio and higher sales of North America flavors. The Animal Nutrition unit witnessed sustained growth in the quarter under review, driven by a solid performance from Neovia, strong demand for amino acids and sturdy sales in pet care, which were somewhat offset by soft demand for aquaculture feed and currency headwinds.
Other Financials
Archer Daniels ended the quarter with cash and cash equivalents of $948 million, long-term debt, including current maturities, of $7,924 million and shareholders’ equity of $19,341 million.
In the nine months ending Sep 30, 2020, the company used $1,516 million in cash for operating activities. Additionally, it bought back shares of $117 million and paid out dividends of $607 million in the said period.
Price Performance
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 16.5% compared with the industry’s 11.6% growth.
Stocks to Consider
Lamb Weston Holdings (LW - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Procter Gamble Company (PG - Free Report) has a long-term earnings growth rate of 7.6%. The stock presently carries a Zacks Rank #2.
General Mills, Inc. (GIS - Free Report) , with a long-term earnings growth rate of 7.5%, currently carries a Zacks Rank #2.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>