It has been about a month since the last earnings report for Archer Daniels Midland (ADM Quick QuoteADM - Free Report) . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

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

Archer Daniels Q1 Earnings & Revenues Surpass Estimates

Archer Daniels posted impressive first-quarter 2023 results. The top and bottom lines advanced year over year and beat the Zacks Consensus Estimate. Results have been bolstered by strong margins across the Ag Services & Oilseeds, and Carbohydrate Solutions segments and a solid product portfolio.

Q1 Highlights

Archer Daniels’ adjusted earnings of $2.09 per share in the first quarter outpaced the Zacks Consensus Estimate of $1.71 and our estimate of $1.62. The figure also jumped 10% from $1.90 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $2.12 per share, up 14% from the prior-year quarter’s $2.12.

Revenues advanced 1.8% year over year to $24,072 million, surpassing the Zacks Consensus Estimate of $23,480 million and our estimate of $23,617.5 million.

Segment-wise, revenues for Ag Services & Oilseeds grew 1.8% year over year, whereas Carbohydrate Solutions’ revenues rose 5.1% year over year. However, Nutrition witnessed a year-over-year revenue decline of 3.7%.

The gross profit increased 9.6% year over year to $2,080 million, while the gross margin expanded 60 basis points (bps) to 8.6% in the quarter under review. SG&A expenses rose 6.3% to $881 million.

Archer Daniels reported an adjusted segmental operating profit of $1,725 million in first-quarter 2023, up 11% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits grew 11.7% year over year to $1,719 million.

Segmental Operating Profit

Adjusted operating profit for Ag Services & Oilseeds rose 20% year over year to $1,210 million. This can be attributable to strength across the South America region, driven by excellent risk management and solid export demand due to record Brazilian soybean crop. Then again, stronger soybean exports aided North America origination. The Global Trade performance gained from solid margins and efficient execution.

Crushing results remained flat year over year. Strong soybean and softseed crush margins stemming from robust demand for renewable fuels contributed to the results in North America. The performance in the EMEA region was drab year over year due to trade flows adjusted from the dislocations caused last year by the war in Ukraine.

Refined Products and Other results have been strong year over year, benefiting from record volumes and strong margins in North America biodiesel, as well as robust demand for food oil and export demand for biodiesel in EMEA. Also, equity earnings from Wilmar were lower than that in the year-earlier quarter.

The Carbohydrate Solutions segment’s adjusted operating profit declined 14% to $273 million. The Starches and Sweeteners sub-segment, including ethanol production from the wet mills, has recorded improved year-over-year results. This mainly resulted from solid volumes and strong margins in the North America region, which partly offset lower ethanol margins.

Meanwhile, robust margins aided the EMEA region. The global wheat milling business witnessed higher margins, driven by solid demand.

Vantage Corn Processors’ results have been soft due to higher ethanol inventory levels, which, in turn, dented the margins.

In the Nutrition segment, the adjusted operating profit of $145 million fell 23% from $189 million in the year-ago quarter. The Human Nutrition unit was flat year over year. The Flavors unit was drab due to sluggish results in North America, while sturdy margins aided the Specialty Ingredients unit. The Health & Wellness business remained weak year over year.

The Animal Nutrition unit was weak year over year due to lower margins in amino acids.

Other Financials

The company ended the quarter with cash and cash equivalents of $899 million; long-term debt, including current maturities, of $8,697 million; and shareholders’ equity of $24,896 million. As of Mar 31, 2023, ADM used $1,610 million in cash for operating activities. It repurchased shares worth $351 million and dividends of $248 million in the reported quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -8.42% due to these changes.

VGM Scores

At this time, ADM has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

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