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Archer Daniels' (ADM) Q2 Earnings & Revenues Beat Estimates

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Shares of Archer Daniels Midland Company (ADM - Free Report) rose more than 1% before the trading session on Jul 26, following the second-quarter 2021 results, wherein both top and bottom lines advanced year over year. This marked the seventh straight quarter of adjusted operating profit growth. Solid performance in its Ag Services & Oilseeds and Carbohydrate Solutions as well as record operating profit growth in Nutrition segments aided the quarterly growth.

Driven by a solid start to 2021 and continued momentum in the second half of 2021, the company envisions another year of strong earnings growth. Management lifted 2021 operating profit growth guidance in Nutrition segments to 20%.

Shares of this Zacks Rank #2 (Buy) company have gained 17.4% year to date, outperforming the industry’s 2.8% growth.

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Q2 Highlights

Adjusted earnings of $1.33 per share in the second quarter outpaced the Zacks Consensus Estimate of $1.01. The figure also surged 56.5% from 85 cents in the year-ago quarter. On a reported basis, the company’s earnings were $1.26 per share, up 50% from the prior-year quarter’s 84 cents.

Revenues rallied 40.8% year over year to $22,926 million and surpassed the Zacks Consensus Estimate of $18,196 million. Solid sales across majority of the segments contributed to the top line.

Segment-wise, revenues for the Ag Services & Oilseeds, Nutrition and Carbohydrate Solutions segments improved 43.4% 20.6% and 40% year over year to $18,271 million, $1,733 million and $2,820 million, respectively.

Gross profit increased 32% year over year to $1,463 million, while gross margin contracted 40 basis points (bps) to 6.4% in the quarter under review. SG&A expenses rose 15.8% to $739 million.

Archer Daniels reported an adjusted segmental operating profit of $1,160 million in second-quarter 2021, up 44.3% from the year-ago quarter. On a GAAP basis, the company’s segmental operating profits grew nearly 41% year over year to $1,145 million.

Segment Operating Profit Discussion

Adjusted operating profit at Ag Services & Oilseeds grew 38% year over year to $570 million. Operating results gained from solid performance in North America, driven by higher export volumes stemming from increased corn sales to China. On the flip side, a slow-selling season along with rising commodity costs led to the sluggishness in South America. Also, unfavorable timing acted as a deterrent.

Strong margins in North American soy and EU softseeds on the back of healthy demand for vegetable oil contributed positively to the crushing business. However, dismal soybean crush margins in South America and the adverse impact of timing acted as headwinds. Operating results for Refined Products and Other improved year over year, driven by a recovery in foodservice and favorable timing impacts in North America, which somewhat offset the negative impacts of the reduction in Brazilian biodiesel mandates.

The Carbohydrate Solutions segment’s adjusted operating profit surged 96.4% to $383 million. Starches and sweeteners gained from improved performance in ethanol, solid performance in corn oil as well as a recovery in the foodservice business. Vantage Corn Processors performed well year over year on sturdy margins of fuel ethanol, a solid performance in USP-grade alcohol and the resumption of production at its two dry mills.

In the Nutrition segment, adjusted operating profit of $201 million grew 27.2% from $158 million in the year-ago quarter owing to significant gains in Human and Animal Nutrition units. The North America and EMEA regions gained from strength in the flavors business stemming from higher volumes and better product mix, particularly in the beverage segment. Also, sales growth in specialty proteins aided the Specialty Ingredients unit while robust sales and margins in probiotics contributed to the Health & Wellness category. The Animal Nutrition unit grew year over year owing to positive demand and margins in amino acids, strength in feed additives and ingredients, and improved performance in the EMEA region, which more than offset the adverse impacts of COVID-19.

Archer Daniels Midland Company Price, Consensus and EPS Surprise

Other Financials

Archer Daniels ended the quarter with cash and cash equivalents of $869 million, long-term debt, including current maturities, of $8,432 million and shareholders’ equity of $21,603 million.

In the six months ending Jun 30, 2021, the company provided $3,007 million in cash for operating activities. Additionally, it paid out dividends of $417 million in the said period.

Other Stocks to Consider

Tyson Foods (TSN - Free Report) , a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamb Weston Holdings (LW - Free Report) has a long-term earnings growth rate of 10.8% and currently, a Zacks Rank #2.

Associated British Foods (ASBFY - Free Report) — another Zacks Rank #2 stock — has a long-term earnings growth rate of 14.3%.