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Archer Daniels Reports Preliminary Q3 Results, Trims 2024 EPS Outlook
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Archer Daniels Midland Company (ADM - Free Report) has been going through a tough phase for some time now. The company has been witnessing sluggishness across its Ag Services & Oilseeds (AS&O) unit for a while. In addition, lower pricing, foreign exchange headwinds and a challenging operating landscape have been acting as deterrents. ADM has announced preliminary results for the third quarter of 2024.
More on ADM’s Preliminary Results
Management highlighted that the Nutrition business witnessed lower-than-expected results, affected by weaker market conditions. Overall, third-quarter operating results were mixed. Nevertheless, the Carbohydrate Solutions segment reported solid results.
Management envisions net earnings of $18 million, with adjusted net earnings of $530 million for the third quarter of 2024. GAAP earnings are likely to be $461 million with respect to its Wilmar equity investment. ADM projects earnings per share (EPS) of $0.04 and adjusted EPS of $1.09, down from the prior-year quarter. It delivered adjusted net earnings of $880 million in the third quarter of 2023. The company recorded adjusted EPS of $1.63 in the year-earlier quarter.
Archer Daniels expects a trailing four-quarter average return on invested capital (ROIC) of 6.6%, whereas it forecasts a trailing four-quarter average adjusted ROIC of 8.8%.
Regarding cash flows, the company’s year-to-date cash flows from operating activities are likely to be $2.468 billion, while cash flows from operations before working capital are expected to be $2.341 billion. In the prior-year period, ADM had cash flows from operating activities of $1.891 billion and cash flows from operations before working capital of $3.804 billion.
ADM informed that it will amend its 2023 Form 10-K and Form 10-Q for the first and second quarters of 2024 to restate the segment information disclosure. The restated filings will have corrections for the identified faults with respect to the intersegment sales. The company has identified other misclassified intersegment transactions, while testing new controls. The restatement of such forms is not anticipated to materially affect results on a consolidated basis.
ADM Segments’ Preliminary Q3 & YTD 2024 Results
The preliminary earnings results for ADM’s reportable segments – AS&O, Carbohydrate Solutions and Nutrition, and other and corporate earnings results are further discussed. AS&O’s operating profit was $480 million during the third quarter, down 43% year over year. The Ag Services subsegment’s operating profit was down 53% year over year, owing to lower results in South America Origination as slower farmer selling and increased logistics costs hurt margins. The Crushing subsegment’s operating profit fell 25% from the prior-year quarter. Global soybean crush margins increased on solid margins in EMEA.
In the quarter, there were nearly zero mark-to-market timing impacts compared with the $100 million of favorable impacts a year ago, totaling roughly $100 million of unfavorable net impacts year over year. The current quarter reflected $24 million of insurance proceeds for the part settlement of the Decatur East and West insurance claims with respect to the incidents in 2023. The Refined Products & Other subsegment’s operating profit reduced 63% from the year-ago period on lower results in North America. Increased imports of used cooking oil and elevated pre-treatment capacity led to lower refining and global biodiesel margins. Equity earnings from ADM’s Wilmar equity investment remained $62 million in the quarter. To date in 2024, the AS&O unit delivered $1.8 billion in segment operating profit, lower year over year. Excess supplies out of South America created a higher balanced supply and demand conditions, resulting in a low-margin backdrop in the segment. Higher segment volumes and reduced costs partly offset the impacts of lower margins. Equity earnings from the Wilmar equity investment were 20% higher from the prior-year period.
The Carbohydrate Solutions division’s operating profit was $452 million, which dipped 3% year over year. The Starches & Sweeteners subsegment rose 13% year over year, mainly driven by solid starches and sweeteners volumes and margins, aided by high-utilization rates across the network. The quarter had $47-million of insurance proceeds for the partial settlement of the Decatur West insurance claims occurred in 2023. In the Vantage Corn Processing subsegment, operating loss of $3 million was lower from the prior year period, driven by higher inventories and production, leading to a lower margin environment. Year to date in 2024, the Carbohydrate Solutions unit’s operating profit of $1.1 billion fell 1% year over year on soft margins in the EMEA region and weak domestic ethanol margins. This was somewhat offset by improved volumes and reduced costs.
The Nutrition division’s operating profit was $105 million, down 19% year over year. The Human Nutrition subsegment’s operating profit was $86 million, down 27% from the year-ago period. Robust performance by Flavors M&A was accompanied by the lapping non-recurring gains in Health & Wellness in the year-ago period, apart from some other costs that included costs with respect to the closure of a joint venture.
In the Animal Nutrition subsegment, operating profit of $19 million increased 58% year over year, as cost-optimization plans and decline in input costs buoyed higher margins. Year to date in 2024, the segment’s operating profit of $298 million was 32% lower year over year, led by the negative impacts of the unplanned downtime at Decatur East, soft texturants margins and increased costs in Human Nutrition.
Other Updates on ADM
For the third quarter, ADM’s Other business operating loss was $17 million, down $63 million from the prior-year period, owing to the soft Captive insurance results from $112 million in claim settlements. This included the claim settlements, which were part settlements of $96 million for the Decatur East and West insurance claims. ADM Investor Services results decreased on lower interest income. Year to date, Other business operating profit was $200 million, down $29 million from the prior year. Archer Daniels’ Investor Services results declined on lower interest income.
In Corporate , unallocated corporate expenses rose year over year, due to increased $28 million of legal fees and $14 million of financing costs, somewhat offset by reduced incentive compensation. Year to date, unallocated corporate costs rose year over year on increased global technology investments to aid digital transformation, $75 million in higher legal fees and $33 million in higher financing costs.
Consequently, management trimmed its earlier-issued EPS view for 2024. It currently forecasts adjusted EPS to be in the range of $4.50-$5.00 for the full year, owing to the trends in the company’s performance till date, legislative and regulatory policy issues, as well as soft market demand and internal operational headwinds. Management, in its last earnings call, had reaffirmed its EPS outlook to be in the band of $5.25-$6.25.
Image Source: Zacks Investment Research
The company has postponed the webcast, which was initially scheduled for today. It plans to reschedule the webcast to discuss the third-quarter results once it has filed the amended 2023 Form 10-K and the first and second quarters of 2024 Form 10-Qs with restated financials, along with the Form 10-Q for the third quarter of the current year.
We note that shares of this Zacks Rank #5 (Strong Sell) company have lost 3.8% in the past three months against the industry’s 8.9% growth.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, presently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.
VITL has a trailing four-quarter average earnings surprise of 82.5%.
Nomad Foods Limited (NOMD - Free Report) , manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.
The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.
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Archer Daniels Reports Preliminary Q3 Results, Trims 2024 EPS Outlook
Archer Daniels Midland Company (ADM - Free Report) has been going through a tough phase for some time now. The company has been witnessing sluggishness across its Ag Services & Oilseeds (AS&O) unit for a while. In addition, lower pricing, foreign exchange headwinds and a challenging operating landscape have been acting as deterrents. ADM has announced preliminary results for the third quarter of 2024.
More on ADM’s Preliminary Results
Management highlighted that the Nutrition business witnessed lower-than-expected results, affected by weaker market conditions. Overall, third-quarter operating results were mixed. Nevertheless, the Carbohydrate Solutions segment reported solid results.
Management envisions net earnings of $18 million, with adjusted net earnings of $530 million for the third quarter of 2024. GAAP earnings are likely to be $461 million with respect to its Wilmar equity investment. ADM projects earnings per share (EPS) of $0.04 and adjusted EPS of $1.09, down from the prior-year quarter. It delivered adjusted net earnings of $880 million in the third quarter of 2023. The company recorded adjusted EPS of $1.63 in the year-earlier quarter.
Archer Daniels expects a trailing four-quarter average return on invested capital (ROIC) of 6.6%, whereas it forecasts a trailing four-quarter average adjusted ROIC of 8.8%.
Regarding cash flows, the company’s year-to-date cash flows from operating activities are likely to be $2.468 billion, while cash flows from operations before working capital are expected to be $2.341 billion. In the prior-year period, ADM had cash flows from operating activities of $1.891 billion and cash flows from operations before working capital of $3.804 billion.
ADM informed that it will amend its 2023 Form 10-K and Form 10-Q for the first and second quarters of 2024 to restate the segment information disclosure. The restated filings will have corrections for the identified faults with respect to the intersegment sales. The company has identified other misclassified intersegment transactions, while testing new controls. The restatement of such forms is not anticipated to materially affect results on a consolidated basis.
ADM Segments’ Preliminary Q3 & YTD 2024 Results
The preliminary earnings results for ADM’s reportable segments – AS&O, Carbohydrate Solutions and Nutrition, and other and corporate earnings results are further discussed. AS&O’s operating profit was $480 million during the third quarter, down 43% year over year. The Ag Services subsegment’s operating profit was down 53% year over year, owing to lower results in South America Origination as slower farmer selling and increased logistics costs hurt margins. The Crushing subsegment’s operating profit fell 25% from the prior-year quarter. Global soybean crush margins increased on solid margins in EMEA.
In the quarter, there were nearly zero mark-to-market timing impacts compared with the $100 million of favorable impacts a year ago, totaling roughly $100 million of unfavorable net impacts year over year. The current quarter reflected $24 million of insurance proceeds for the part settlement of the Decatur East and West insurance claims with respect to the incidents in 2023. The Refined Products & Other subsegment’s operating profit reduced 63% from the year-ago period on lower results in North America. Increased imports of used cooking oil and elevated pre-treatment capacity led to lower refining and global biodiesel margins. Equity earnings from ADM’s Wilmar equity investment remained $62 million in the quarter. To date in 2024, the AS&O unit delivered $1.8 billion in segment operating profit, lower year over year. Excess supplies out of South America created a higher balanced supply and demand conditions, resulting in a low-margin backdrop in the segment. Higher segment volumes and reduced costs partly offset the impacts of lower margins. Equity earnings from the Wilmar equity investment were 20% higher from the prior-year period.
The Carbohydrate Solutions division’s operating profit was $452 million, which dipped 3% year over year. The Starches & Sweeteners subsegment rose 13% year over year, mainly driven by solid starches and sweeteners volumes and margins, aided by high-utilization rates across the network. The quarter had $47-million of insurance proceeds for the partial settlement of the Decatur West insurance claims occurred in 2023. In the Vantage Corn Processing subsegment, operating loss of $3 million was lower from the prior year period, driven by higher inventories and production, leading to a lower margin environment. Year to date in 2024, the Carbohydrate Solutions unit’s operating profit of $1.1 billion fell 1% year over year on soft margins in the EMEA region and weak domestic ethanol margins. This was somewhat offset by improved volumes and reduced costs.
The Nutrition division’s operating profit was $105 million, down 19% year over year. The Human Nutrition subsegment’s operating profit was $86 million, down 27% from the year-ago period. Robust performance by Flavors M&A was accompanied by the lapping non-recurring gains in Health & Wellness in the year-ago period, apart from some other costs that included costs with respect to the closure of a joint venture.
In the Animal Nutrition subsegment, operating profit of $19 million increased 58% year over year, as cost-optimization plans and decline in input costs buoyed higher margins. Year to date in 2024, the segment’s operating profit of $298 million was 32% lower year over year, led by the negative impacts of the unplanned downtime at Decatur East, soft texturants margins and increased costs in Human Nutrition.
Other Updates on ADM
For the third quarter, ADM’s Other business operating loss was $17 million, down $63 million from the prior-year period, owing to the soft Captive insurance results from $112 million in claim settlements. This included the claim settlements, which were part settlements of $96 million for the Decatur East and West insurance claims. ADM Investor Services results decreased on lower interest income. Year to date, Other business operating profit was $200 million, down $29 million from the prior year. Archer Daniels’ Investor Services results declined on lower interest income.
In Corporate , unallocated corporate expenses rose year over year, due to increased $28 million of legal fees and $14 million of financing costs, somewhat offset by reduced incentive compensation. Year to date, unallocated corporate costs rose year over year on increased global technology investments to aid digital transformation, $75 million in higher legal fees and $33 million in higher financing costs.
Consequently, management trimmed its earlier-issued EPS view for 2024. It currently forecasts adjusted EPS to be in the range of $4.50-$5.00 for the full year, owing to the trends in the company’s performance till date, legislative and regulatory policy issues, as well as soft market demand and internal operational headwinds. Management, in its last earnings call, had reaffirmed its EPS outlook to be in the band of $5.25-$6.25.
Image Source: Zacks Investment Research
The company has postponed the webcast, which was initially scheduled for today. It plans to reschedule the webcast to discuss the third-quarter results once it has filed the amended 2023 Form 10-K and the first and second quarters of 2024 Form 10-Qs with restated financials, along with the Form 10-Q for the third quarter of the current year.
We note that shares of this Zacks Rank #5 (Strong Sell) company have lost 3.8% in the past three months against the industry’s 8.9% growth.
Stocks to Consider
Freshpet, Inc. (FRPT - Free Report) , a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.
Vital Farms (VITL - Free Report) , which provides pasture-raised products, presently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.
VITL has a trailing four-quarter average earnings surprise of 82.5%.
Nomad Foods Limited (NOMD - Free Report) , manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.
The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.