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Will Oilseeds Segment Hurt Archer Daniels (ADM) Q3 Earnings?
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Archer Daniels Midland Company (ADM - Free Report) is slated to release third-quarter 2017 results on Oct 31. The question lingering in investors’ minds is whether this food processing behemoth will be able to deliver a positive earnings surprise in the quarter to be reported.
The company delivered a positive earnings surprise of 9.6% in the last reported quarter and has outperformed the Zacks Consensus Estimate in two of the trailing four quarters. Consequently, the company has delivered a trailing four-quarter average beat of 6.8%. Let’s see how things are shaping up prior to this announcement.
Archer-Daniels-Midland Company Price and EPS Surprise
The current Zacks Consensus Estimate for the quarter under review is pegged at 55 cents, reflecting year-over-year decline of about 7%. Further, we note that earnings estimate for the quarter has declined by 1 cent in the last seven days, following an 8 cents decline in the last 30 days. Analysts polled by Zacks expect revenues of $15.6 billion, down 1.3% from the year-ago quarter.
Furthermore, the company has a negative sales surprise history having lagged estimates for over three years now. This led Archer Daniels to underperform the broader Consumer Staples sector year to date. The company’s shares dipped 5.6%, while the sector escalated 8%. The company’s dismal top-line performance makes us slightly skeptical about its upcoming results.
Factors at Play
Archer Daniels’ murky sales surprise trend due to lower sales at all segments has been a woe. This drab performance history can be attributed to the fluctuating commodity prices, oversupply in the industry and unfavorable margins. Additionally, management expects exports from Argentine to continue to press margins at the Oilseeds segment in the third quarter, when the global environment is anticipated to remain highly competitive. Also, we remain worried about Harvey's impact on the Archer Daniels' performance. The Zacks Consensus Estimate for operating profit in the Oilseeds Processing segment stands at $210 million.
Looking ahead, Archer Daniels remains committed to strengthen its capacities and geographic spread, through buyouts and other organic expansions. The company also remains focused on efficient cost and capital management. These factors drove the company’s first-half results, enabling it to return value to shareholders.
Notably, the company is ahead of track with its 2017 run-rate savings goal of $225 million. All said, management remains confident of achieving strong year-over-year earnings growth in 2017. Further, it is believed that the company is poised to emerge stronger in 2018. However, the aforementioned obstacles make us anxious about Archer Daniels’ upcoming results.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Archer Daniels is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Archer Daniels currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of -3.39%, as the Most Accurate estimate of 53 cents is pegged below the Zacks Consensus Estimate of 55 cents. The combination of Archer Daniels’ Zacks Rank # 3 and Earnings ESP of -3.39% makes surprise prediction difficult.
Stocks with Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Avon products Inc. has an Earnings ESP of +2.94% and a Zacks Rank #2.
Ralph Lauren Corporation (RL - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
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Will Oilseeds Segment Hurt Archer Daniels (ADM) Q3 Earnings?
Archer Daniels Midland Company (ADM - Free Report) is slated to release third-quarter 2017 results on Oct 31. The question lingering in investors’ minds is whether this food processing behemoth will be able to deliver a positive earnings surprise in the quarter to be reported.
The company delivered a positive earnings surprise of 9.6% in the last reported quarter and has outperformed the Zacks Consensus Estimate in two of the trailing four quarters. Consequently, the company has delivered a trailing four-quarter average beat of 6.8%. Let’s see how things are shaping up prior to this announcement.
Archer-Daniels-Midland Company Price and EPS Surprise
Archer-Daniels-Midland Company Price and EPS Surprise | Archer-Daniels-Midland Company Quote
What to Expect?
The current Zacks Consensus Estimate for the quarter under review is pegged at 55 cents, reflecting year-over-year decline of about 7%. Further, we note that earnings estimate for the quarter has declined by 1 cent in the last seven days, following an 8 cents decline in the last 30 days. Analysts polled by Zacks expect revenues of $15.6 billion, down 1.3% from the year-ago quarter.
Furthermore, the company has a negative sales surprise history having lagged estimates for over three years now. This led Archer Daniels to underperform the broader Consumer Staples sector year to date. The company’s shares dipped 5.6%, while the sector escalated 8%. The company’s dismal top-line performance makes us slightly skeptical about its upcoming results.
Factors at Play
Archer Daniels’ murky sales surprise trend due to lower sales at all segments has been a woe. This drab performance history can be attributed to the fluctuating commodity prices, oversupply in the industry and unfavorable margins. Additionally, management expects exports from Argentine to continue to press margins at the Oilseeds segment in the third quarter, when the global environment is anticipated to remain highly competitive. Also, we remain worried about Harvey's impact on the Archer Daniels' performance. The Zacks Consensus Estimate for operating profit in the Oilseeds Processing segment stands at $210 million.
Looking ahead, Archer Daniels remains committed to strengthen its capacities and geographic spread, through buyouts and other organic expansions. The company also remains focused on efficient cost and capital management. These factors drove the company’s first-half results, enabling it to return value to shareholders.
Notably, the company is ahead of track with its 2017 run-rate savings goal of $225 million. All said, management remains confident of achieving strong year-over-year earnings growth in 2017. Further, it is believed that the company is poised to emerge stronger in 2018. However, the aforementioned obstacles make us anxious about Archer Daniels’ upcoming results.
What the Zacks Model Unveils?
Our proven model does not conclusively show that Archer Daniels is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Archer Daniels currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of -3.39%, as the Most Accurate estimate of 53 cents is pegged below the Zacks Consensus Estimate of 55 cents. The combination of Archer Daniels’ Zacks Rank # 3 and Earnings ESP of -3.39% makes surprise prediction difficult.
Stocks with Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
B&G Foods, Inc. (BGS - Free Report) has an Earnings ESP of +2.08% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Avon products Inc. has an Earnings ESP of +2.94% and a Zacks Rank #2.
Ralph Lauren Corporation (RL - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #2.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>