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Here's Why You Should Retain Archer Daniels (ADM) Stock

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Archer Daniels Midland Company (ADM - Free Report) appears well poised for growth, thanks to its robust business strategies. The company is significantly progressing on its three strategic pillars, which are optimize, drive and growth. The company is actively managing productivity and innovation as well as aligning work to the interconnected trends in food security, health and wellbeing.

Management reaffirmed its earlier earnings per share (EPS) guidance for the full year. The company envisions adjusted EPS in the band of $5.25-$6.25 for the full year.

Let’s Delve Deep

Under the optimize pillar, the company had expanded alternative protein capabilities in Decatur, IL, and starch production in Marshall, MN. The company concluded its alternative protein expansion in Serbia. As part of the company’s optimizing pillar, it has been adapting with consumers changing nutritional preferences. Under its drive pillar, the company is adapting its organizational structure to meet operational excellence and set goals.

Under the growth pillar, the company is looking to expand its footprint in fast-growing alternative protein. Notably, Archer Daniels had an agreement with Benson Hill to process and commercialize a portfolio of proprietary ingredients derived from their ultra-high protein soybeans. Also, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets. ADM is also utilizing innovative technologies to develop new products and boost operating capabilities.

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In 2024, the global grain and oil seed supply is likely to increase as expected improvements in weather will support huge production across the major South American countries. Management assumes commodity prices to ease, thus anticipating global soybean crush margins to moderate in 2024, moving into a range of $35-$60 per metric ton. From the demand side, the company continues to forecast vegetable oil demand growth from renewable diesel and lower soybean meal demand growth to boost margin improvement.

In the second quarter, for carbohydrate solutions, management anticipates the quarter to be higher year over year, driven by robust demand and margins in North American starches and sweeteners, somewhat offset by moderating margins in wheat milling and international corn milling after elevated results in the year-ago period. Further, it projects a strong demand for ethanol both domestically and in the export markets.

Here’s More

In the recent developments, the company had entered into an accelerated share repurchase (“ASR”) agreement with delayed share delivery with Merrill Lynch International, an affiliate of BofA Securities, Inc., to buy back $1 billion of the company’s common stock. The company returned $1.3 billion to its shareholders via repurchases during the quarter, with $1 billion executed via ASR program. Management intends to actualize $1 billion of additional share repurchases for the rest of the year.

As of Mar 31, 2024, Archer Daniels provided $0.7 billion in cash for operating activities. It repurchased shares worth $1.3 billion and cash dividends of $257 million in the first quarter. As of Mar 31, 2024, there were 501,763,545 shares outstanding. The company announced a quarterly dividend of 50 cents, payable Jun 5, to shareholders of record as of May 16. Notably, this marks the 370th straight quarterly payment.

We note that shares of this Zacks Rank #3 (Hold) company have increased 12.9% in the past three months compared with the industry’s 3.2% rise.

Stocks to Consider

We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Utz Brands (UTZ - Free Report) , Celsius Holdings (CELH - Free Report) and Diageo (DEO - Free Report) .

Utz Brands manufactures a diverse portfolio of salty snacks. UTZ, which currently carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 2.6% on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Utz Brands’ current financial-year earnings suggests growth of 19.3% from the year-ago reported numbers.

Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2 (Buy). CELH has a trailing four-quarter earnings surprise of 67.4%, on average.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 41.6% each from the year-ago reported figures.

Diageo currently carries a Zacks Rank of 2 (Buy). DEO shares have gained 3.4% in the past three months.

The Zacks Consensus Estimate for Diageo’s current financial-year sales suggests growth of 11% from the year-ago period. The consensus mark for the company’s EPS indicates a decline of 8.2% from the year-ago quarter’s actual.

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