It has been about a month since the last earnings report for Archer Daniels Midland (ADM Quick QuoteADM - Free Report) . Shares have added about 18% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ADM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Archer Daniels' Q4 Earnings & Revenue Beat Estimates

Archer Daniels reported fourth-quarter 2020 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. Despite the tough ongoing environment, it reported the fourth straight quarter of adjusted segment operating profit growth.

Also, management highlighted that its Ag Services and Oilseeds segment retained momentum, backed by solid demand. This, in turn, led the unit to cross the $2-billion profit mark. Going ahead, continued demand for grains and oilseeds as well as meal and oils position it well for a solid start to 2021. Moreover, healthy demand for industrial starches, retail flour and high-grade alcohol is likely to favor the Carbohydrate Solutions unit. Lastly, the Nutrition segment with its strategic partnerships, product innovation and positive consumer growth trends remains poised for solid revenue and profit growth in 2021. Overall, management expects another year of solid adjusted segment operating profit and bottom-line growth.

Q4 Highlights

Adjusted earnings of $1.21 per share in the fourth quarter declined 14.8% from the year-ago quarter but outpaced the Zacks Consensus Estimate of $1.04. On a reported basis, the company’s earnings were $1.22 per share, up 36% from the prior-year quarter’s 90 cents.

Revenues advanced 10.1% year over year to $17,978 million and surpassed the Zacks Consensus Estimate of $16,553 million. Solid sales across the majority of segments contributed to the top line.

Segment-wise, revenues for the Nutrition and the Ag Services & Oilseeds segments improved 1.9% and 16.3% year over year to $1,441 million and $14,369 million, respectively. Meanwhile, the metric declined 16.1% to $2,078 million for the Carbohydrate Solutions unit.

Gross profit increased 15.7% year over year to $1,352 million, while gross margin expanded 30 basis points (bps) to 7.5% in the quarter under review. SG&A expenses rose 14.5% to $749 million.

Moreover, Archer Daniels reported an adjusted segment operating profit of $1,152 million in fourth-quarter 2020, up 12.1% from the year-ago quarter. On a GAAP basis, the company’s segmental operating profits grew nearly 22% year over year to $1,139 million.

Segment Operating Profit Discussion

Adjusted operating profit at Ag Services & Oilseeds increased 12.9% year over year to $834 million. Operating results gained performance in North America, driven by robust demand particularly in China along with 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.

Moreover, strong margins in all regions on the back of higher soybean supplies and healthy global demand for meal and vegetable oils contributed positively to the crushing business. Operating results for Refined Products and Other improved year over year, driven by solid margins in South America.

The Carbohydrate Solutions segment’s adjusted operating profit grew 19.5% to $208 million owing to a higher demand for starches and sweeteners. Also, the unit gained from reduced net corn expenses and risk-control measures, which more than offset soft margins in corn oil and wet mill ethanol. Despite sluggishness in the ethanol industry, Vantage Corn Processors performed well year over year on higher demand for USP-grade alcohol.

In the Nutrition segment, adjusted operating profit of $127 million rallied 24.5% from $102 million in the year-ago quarter owing to significant gains in Human and Animal Nutrition units. The Human Nutrition division gained from higher sales of flavors driven by favorable product mix in both North America and EMEAI regions. The Animal Nutrition unit witnessed sustained growth in the quarter under review, driven by a solid performance in Asia and EMEAI regions along with improved demand in amino acid results. This was somewhat offset by currency headwinds in Latin America.

Other Financials

Archer Daniels ended the quarter with cash and cash equivalents of $666 million, long-term debt, including current maturities, of $7,887 million and shareholders’ equity of $20,022 million.

In the twelve months ending Dec 31, 2020, the company used $2,386 million in cash for operating activities. Additionally, it bought back shares of $133 million and paid out dividends of $809 million in the said period.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 20.73% due to these changes.

VGM Scores

At this time, ADM has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, ADM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.