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Here's Why Archer Daniels (ADM) Seems a Promising Pick
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Archer Daniels Midland Company (ADM - Free Report) looks well positioned on the back of solid demand, better productivity and product innovations. Persistent growth in the Nutrition segment bodes well. Gains from the integrated global value chain and a solid product portfolio have been bolstering the company’s performance.
Archer Daniels remains on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As part of readiness efforts, the company introduced a company-wide simplification initiative. The company’s strategic pillars for growth are guided and supported by the Readiness program, which focused on accelerating and enhancing competitiveness.
In addition, Archer Daniels’ strategic transformation mainly focuses on two strategic pillars, namely Productivity and Innovation. The Productivity pillar comprises boosting the roles of the company’s centers of excellence in procurement, supply-chain and functions to deliver more efficiencies; roll out of the 1ADM business transformation program and implementation of enhanced standardized business processes; and greater use of technology, analytics, and automation at production facilities.
The Innovation pillar includes expansions in enriching the customer experience with leveraging producer relationships and improving the use of state-of-the-art digital technology. This also covers sustainability-driven innovation, spreading across the complete range of products, solutions, capabilities, and commitments to cater to customers efficiently.
Growth efforts, including organic growth to drive additional capacity, are resonating well with burgeoning demand. The company is also indulging in strategic mergers and buyouts.
Image Source: Zacks Investment Research
We note that management is looking to expand its footprint in the fast-growing alternative protein area. Notably, Archer Daniels inked an agreement with Benson Hill to process and commercialize a portfolio of proprietary ingredients derived from their ultra-high protein soybeans.
The company has also been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. Markedly, the company collaborated with LG Chem for two joint ventures. This will help produce lactic acid and polylactic acid for a variety of applications, including bioplastics across the United States.
Archer Daniels continues to adapt to consumers changing nutritional preferences. Robust gains from its Nutrition unit have been bolstering ADM’s overall results. During third-quarter 2022, revenues in the segment rose 9.8% year over year.
The segment’s adjusted operating profit grew 0.6% year over year, owing to significant gains in the Human and Animal Nutrition units. The Human Nutrition unit gained from solid demand for plant-based proteins and strength in Specialty Ingredients. Flavors unit gained from robust demand growth in EMEA.
Management expects the segment to witness year-over-year growth in the fourth quarter of 2022, driven by continued demand in human nutrition, which is likely to more than offset currency headwinds. Also, the nutrition segment is predicted to grow 15-20% in operating profit on a constant currency basis in 2022.
Bottom Line
We hope that strength in its nutrition unit, product innovation and solid demand will help sustain the stock’s momentum on the bourses. The Zacks Consensus Estimate for 2022 sales and earnings per share is pegged at $102.2 billion and $7.46, respectively. These estimates show year-over-year growth of 19.9% and 43.7%, respectively. Topping it, a long-term earnings growth rate of 7.2% and a VGM Score of B drive optimism.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank of 1. CHEF has a trailing four-quarter earnings surprise of 93.8%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial year’s sales suggests growth of 46.5% from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year’s sales and earnings per share suggests growth of 2.8% and 4.1%, respectively, from the year-ago reported figures.
MGP Ingredients, which produces and markets ingredients and distillery products, currently sports a Zacks Rank of 2. MGPI has a trailing four-quarter earnings surprise of 36.3%, on average.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 24% and 12.5%, respectively, from the year-ago reported figures.
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Here's Why Archer Daniels (ADM) Seems a Promising Pick
Archer Daniels Midland Company (ADM - Free Report) looks well positioned on the back of solid demand, better productivity and product innovations. Persistent growth in the Nutrition segment bodes well. Gains from the integrated global value chain and a solid product portfolio have been bolstering the company’s performance.
These tailwinds have aided the Zacks Rank #1 (Strong Buy) stock to return 43.6% over the course of the past year, comfortably outpacing the industry’s 22% growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s Delve Deeper
Archer Daniels remains on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As part of readiness efforts, the company introduced a company-wide simplification initiative. The company’s strategic pillars for growth are guided and supported by the Readiness program, which focused on accelerating and enhancing competitiveness.
In addition, Archer Daniels’ strategic transformation mainly focuses on two strategic pillars, namely Productivity and Innovation. The Productivity pillar comprises boosting the roles of the company’s centers of excellence in procurement, supply-chain and functions to deliver more efficiencies; roll out of the 1ADM business transformation program and implementation of enhanced standardized business processes; and greater use of technology, analytics, and automation at production facilities.
The Innovation pillar includes expansions in enriching the customer experience with leveraging producer relationships and improving the use of state-of-the-art digital technology. This also covers sustainability-driven innovation, spreading across the complete range of products, solutions, capabilities, and commitments to cater to customers efficiently.
Growth efforts, including organic growth to drive additional capacity, are resonating well with burgeoning demand. The company is also indulging in strategic mergers and buyouts.
Image Source: Zacks Investment Research
We note that management is looking to expand its footprint in the fast-growing alternative protein area. Notably, Archer Daniels inked an agreement with Benson Hill to process and commercialize a portfolio of proprietary ingredients derived from their ultra-high protein soybeans.
The company has also been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. Markedly, the company collaborated with LG Chem for two joint ventures. This will help produce lactic acid and polylactic acid for a variety of applications, including bioplastics across the United States.
Archer Daniels continues to adapt to consumers changing nutritional preferences. Robust gains from its Nutrition unit have been bolstering ADM’s overall results. During third-quarter 2022, revenues in the segment rose 9.8% year over year.
The segment’s adjusted operating profit grew 0.6% year over year, owing to significant gains in the Human and Animal Nutrition units. The Human Nutrition unit gained from solid demand for plant-based proteins and strength in Specialty Ingredients. Flavors unit gained from robust demand growth in EMEA.
Management expects the segment to witness year-over-year growth in the fourth quarter of 2022, driven by continued demand in human nutrition, which is likely to more than offset currency headwinds. Also, the nutrition segment is predicted to grow 15-20% in operating profit on a constant currency basis in 2022.
Bottom Line
We hope that strength in its nutrition unit, product innovation and solid demand will help sustain the stock’s momentum on the bourses. The Zacks Consensus Estimate for 2022 sales and earnings per share is pegged at $102.2 billion and $7.46, respectively. These estimates show year-over-year growth of 19.9% and 43.7%, respectively. Topping it, a long-term earnings growth rate of 7.2% and a VGM Score of B drive optimism.
Other Stocks to Consider
Some other top-ranked stocks are Chef's Warehouse (CHEF - Free Report) , General Mills (GIS - Free Report) and MGP Ingredients (MGPI - Free Report) .
Chef’s Warehouse, a distributor of specialty food products in the United States, currently sports a Zacks Rank of 1. CHEF has a trailing four-quarter earnings surprise of 93.8%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial year’s sales suggests growth of 46.5% from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year’s sales and earnings per share suggests growth of 2.8% and 4.1%, respectively, from the year-ago reported figures.
MGP Ingredients, which produces and markets ingredients and distillery products, currently sports a Zacks Rank of 2. MGPI has a trailing four-quarter earnings surprise of 36.3%, on average.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 24% and 12.5%, respectively, from the year-ago reported figures.