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Archer Daniels (ADM) Boosts Flavor Business Via Latest Buyout

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Archer Daniels Midland Company (ADM - Free Report) has acquired Flavor Infusion International, which will be part of ADM’s flavor category under the Nutrition segment. Flavor Infusion provides flavor and specialty ingredient solutions to customers in Latin America and the Caribbean. It comes with a wide range of flavor ingredients and solutions along with two state-of-the-art manufacturing facilities in Panama and Colombia. Prior to this, ADM acquired WILD Flavors in a bid to venture into the highly-valued flavor space.

Owing to strength in the flavor business, the company’s nutrition segment has been delivering profit growth of 10-20%. For third-quarter 2021, revenues for the segment rose 17% year over year. The segment’s adjusted operating profit grew 19.7% year over year, owing to significant gains in the Human and Animal Nutrition units. Backed by strength across both Human and Animal Nutrition units, the nutrition segment will likely sustain momentum, with year-over-year earnings growth in the fourth quarter and operating profit growth of 20% in 2021.

What’s More?

Archer Daniels has been making efforts to expand the solutions portfolio, which is part of the Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, a plant-based product. Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets. Such endeavors are likely to help ADM attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered into a joint venture with Gevo to help meet the demand for low-carbon sustainable aviation fuel. The company is also utilizing innovative technologies to develop new products and boost operating capabilities.

Driven by these factors, Archer Daniels delivered better-than-expected third-quarter 2021 results, wherein both the top and bottom lines improved year over year. This marked the eighth straight quarter of adjusted operating profit growth. Solid demand, robust crush margins and persistent growth in the Nutrition segment aided quarterly results. Revenues grew 34.5% year over year, driven by solid sales across the majority of the segments. Management remains optimistic about the fourth quarter and full-year performance, driven by healthy global demand. The company also envisions another year of solid earnings growth.

Consequently, shares of this Zacks Rank #3 (Hold) company have gained 31.3% in a year’s time, outperforming the industry’s 6.6% growth.

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Yet, it is reeling under higher performance-related compensation and project-related costs and shifting expenses from business segments to centralized centers of excellence in supply chain and operations. Also, higher manufacturing costs remain a concern for Carbohydrates Solutions and Ag Services & Oilseeds segments in the fourth quarter of 2021.

Stocks to Consider

Some better-ranked stocks in the Consumer Staples sector include MGP Ingredients (MGPI - Free Report) , Inter Parfums, Inc. (IPAR - Free Report) and The Hain Celestial Group (HAIN - Free Report) .

MGP Ingredients, the producer and supplier of distilled spirits and specialty wheat proteins and starch food ingredients, currently sports a Zacks Rank #1 (Strong Buy). Shares of the company have surged 84.2% in a year’s time. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MGP Ingredients’ sales and EPS for the current financial year suggests growth of 55.5% and 61.4%, respectively, from the year-ago figures. MGPI has a trailing four-quarter earnings surprise of 117.6%, on average.

Inter Parfums develops, manufactures, and distributes prestige perfumes as well as cosmetics. It currently sports a Zacks Rank #1. IPAR has a trailing four-quarter earnings surprise of 10.8%, on average.

The Zacks Consensus Estimate for Inter Parfums’ sales and EPS for the current financial year suggests growth of 55.5% and 100%, respectively, from the year-ago figures. Shares of the company have moved up 72.4% in a year’s time.

The Hain Celestial, which provides various natural and organic foods as well as personal care products in North America and Europe, carries a Zacks Rank #2 (Buy) at present. HAIN has a trailing four-quarter earnings surprise of 9.7%, on average. Shares of the company have moved up 4.1% in a year’s time.

The Zacks Consensus Estimate for The Hain Celestial’s EPS for the current financial year suggests growth of 14.5% from the year-ago reported number.