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Archer Daniels (ADM) Displays Strength: Stock Rally to Continue
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Archer Daniels Midland Company (ADM - Free Report) continues to rally on solid fundamentals, owing to robust demand, improved productivity and product innovations. These factors have been bolstering the company’s performance over the past several quarters.
Notably, the company reported the 11th straight quarter of an earnings surprise and the 10th straight quarter of adjusted operating profit growth in first-quarter 2022. Persistent growth in the Nutrition segment, driven by significant gains in the Human and Animal Nutrition units, also remained a key growth driver.
In first-quarter 2022, the company’s revenues advanced 25.2% year over year, driven by solid sales across the majority of the segments. Adjusted earnings of $1.90 per share rose 36.7% in the first quarter, while earnings on a reported basis were up 52.5% year over year.
Shares of this Zacks Rank #1 (Strong Buy) company have gained 24.8% year to date compared with the industry’s 3.2% growth. The company’s shares also comfortably outperformed the Consumer Staples sector’s growth of 2% and compared favorably against the S&P 500’s decline of 13.9% in the same period.
Image Source: Zacks Investment Research
Factors to Drive Further Growth
Archer Daniels has been significantly progressing on its three strategic pillars — optimize, drive and growth. Under the optimize pillar, the company is on track with improvement in its key businesses — the Decatur complex, Golden Peanut and Three Nuts business.
In response to growing trends for all things sustainable, the company has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is 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 attain 10% revenue growth on an annual basis.
In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low carbon sustainable aviation fuel. It also decided to shut down its ethanol facility in Peoria by the end of October 2022. The company is utilizing innovative technologies to develop products and boost operating capabilities.
Archer Daniels is on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As a part of readiness efforts, the company introduced a company-wide simplification initiative. Its strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
Moreover, ADM is witnessing continued momentum in its Nutrition segment. In first-quarter 2022, revenues in the segment rose 23.1% year over year. The segment’s adjusted operating profit grew 23% year over year, owing to significant gains in the Human and Animal Nutrition units. The Human Nutrition unit gained from strength across all businesses. Despite rising costs, continued momentum in Flavors bodes well. Strength in alternative proteins, including gains from the Sojaprotein buyout, and favorable currency timing impacts in South America aided the Specialty Ingredients category.
The Health & Wellness unit also witnessed robust quarterly growth, driven by growth in probiotics, gains from its Deerland Probiotics buyout and solid fiber demand. The animal nutrition unit grew significantly year over year, driven by strength in amino acids stemming from positive changes in the product mix and sturdy demand in North America, which partly offset the global supply-chain disruptions.
Backed by strength across both Human and Animal Nutrition units, the company expects the nutrition segment to report 20% operating profit growth in 2022, up from the earlier mentioned 15% growth. It also expects the nutrition segment to grow significantly higher year over year in the second quarter.
Conclusion
Archer Daniels appears a solid investment bet, buoyed by all the aforesaid tailwinds. Additionally, analysts are quite bullish on the stock’s prospects, evident from its robust top and bottom-line estimates for 2022. The Zacks Consensus Estimate for 2022 sales and earnings are pegged at $93.8 billion and $5.99 per share, indicating growth of 10.1% and 15.4%, respectively, from the year-ago quarter. The consensus estimate for 2022 earnings has moved up 2% in the past seven days.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely The Duckhorn Portfolio (NAPA - Free Report) , McCormick & Company (MKC - Free Report) and Sysco (SYY - Free Report) .
Duckhorn currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.3%. NAPA has a trailing four-quarter earnings surprise of 122.4%, on average. The company has declined 16.5% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Duckhorn’s current financial-year sales and earnings per share suggests growth of 9.6% and 3.5%, respectively, from the year-ago reported numbers. The consensus mark for NAPA’s earnings per share has been unchanged in the past 30 days.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It also currently carries a Zacks Rank #2. MKC has an expected long-term earnings growth rate of 6.1%. The company has risen 2% in the year-to-date period.
The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of 5% and 3.9%, respectively, from the year-ago period’s reported figures. The consensus mark for MKC’s earnings per share has been unchanged in the past 30 days. MKC has a trailing four-quarter earnings surprise of 7.3%, on average.
Sysco currently has a Zacks Rank #2. SYY has a trailing two-quarter earnings surprise of 3.7%, on average. It has an expected long-term earnings growth rate of 11%. The company has gained 3.3% year to date.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 28.9% and 111.1%, respectively, from the year-ago reported numbers. The consensus mark for SYY’s earnings per share has been unchanged in the past 30 days.
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Archer Daniels (ADM) Displays Strength: Stock Rally to Continue
Archer Daniels Midland Company (ADM - Free Report) continues to rally on solid fundamentals, owing to robust demand, improved productivity and product innovations. These factors have been bolstering the company’s performance over the past several quarters.
Notably, the company reported the 11th straight quarter of an earnings surprise and the 10th straight quarter of adjusted operating profit growth in first-quarter 2022. Persistent growth in the Nutrition segment, driven by significant gains in the Human and Animal Nutrition units, also remained a key growth driver.
In first-quarter 2022, the company’s revenues advanced 25.2% year over year, driven by solid sales across the majority of the segments. Adjusted earnings of $1.90 per share rose 36.7% in the first quarter, while earnings on a reported basis were up 52.5% year over year.
Shares of this Zacks Rank #1 (Strong Buy) company have gained 24.8% year to date compared with the industry’s 3.2% growth. The company’s shares also comfortably outperformed the Consumer Staples sector’s growth of 2% and compared favorably against the S&P 500’s decline of 13.9% in the same period.
Image Source: Zacks Investment Research
Factors to Drive Further Growth
Archer Daniels has been significantly progressing on its three strategic pillars — optimize, drive and growth. Under the optimize pillar, the company is on track with improvement in its key businesses — the Decatur complex, Golden Peanut and Three Nuts business.
In response to growing trends for all things sustainable, the company has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is 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 attain 10% revenue growth on an annual basis.
In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low carbon sustainable aviation fuel. It also decided to shut down its ethanol facility in Peoria by the end of October 2022. The company is utilizing innovative technologies to develop products and boost operating capabilities.
Archer Daniels is on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As a part of readiness efforts, the company introduced a company-wide simplification initiative. Its strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
Moreover, ADM is witnessing continued momentum in its Nutrition segment. In first-quarter 2022, revenues in the segment rose 23.1% year over year. The segment’s adjusted operating profit grew 23% year over year, owing to significant gains in the Human and Animal Nutrition units. The Human Nutrition unit gained from strength across all businesses. Despite rising costs, continued momentum in Flavors bodes well. Strength in alternative proteins, including gains from the Sojaprotein buyout, and favorable currency timing impacts in South America aided the Specialty Ingredients category.
The Health & Wellness unit also witnessed robust quarterly growth, driven by growth in probiotics, gains from its Deerland Probiotics buyout and solid fiber demand. The animal nutrition unit grew significantly year over year, driven by strength in amino acids stemming from positive changes in the product mix and sturdy demand in North America, which partly offset the global supply-chain disruptions.
Backed by strength across both Human and Animal Nutrition units, the company expects the nutrition segment to report 20% operating profit growth in 2022, up from the earlier mentioned 15% growth. It also expects the nutrition segment to grow significantly higher year over year in the second quarter.
Conclusion
Archer Daniels appears a solid investment bet, buoyed by all the aforesaid tailwinds. Additionally, analysts are quite bullish on the stock’s prospects, evident from its robust top and bottom-line estimates for 2022. The Zacks Consensus Estimate for 2022 sales and earnings are pegged at $93.8 billion and $5.99 per share, indicating growth of 10.1% and 15.4%, respectively, from the year-ago quarter. The consensus estimate for 2022 earnings has moved up 2% in the past seven days.
Other Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely The Duckhorn Portfolio (NAPA - Free Report) , McCormick & Company (MKC - Free Report) and Sysco (SYY - Free Report) .
Duckhorn currently has a Zacks Rank #2 (Buy) and an expected long-term earnings growth rate of 11.3%. NAPA has a trailing four-quarter earnings surprise of 122.4%, on average. The company has declined 16.5% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Duckhorn’s current financial-year sales and earnings per share suggests growth of 9.6% and 3.5%, respectively, from the year-ago reported numbers. The consensus mark for NAPA’s earnings per share has been unchanged in the past 30 days.
McCormick is one of the leading manufacturers, marketers and distributors of spices, seasonings, specialty foods and flavors. It also currently carries a Zacks Rank #2. MKC has an expected long-term earnings growth rate of 6.1%. The company has risen 2% in the year-to-date period.
The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of 5% and 3.9%, respectively, from the year-ago period’s reported figures. The consensus mark for MKC’s earnings per share has been unchanged in the past 30 days. MKC has a trailing four-quarter earnings surprise of 7.3%, on average.
Sysco currently has a Zacks Rank #2. SYY has a trailing two-quarter earnings surprise of 3.7%, on average. It has an expected long-term earnings growth rate of 11%. The company has gained 3.3% year to date.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 28.9% and 111.1%, respectively, from the year-ago reported numbers. The consensus mark for SYY’s earnings per share has been unchanged in the past 30 days.