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Archer Daniels' Ethanol Margins Surge: Is Growth Now Sustainable?
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Key Takeaways
ADM's Carbohydrate Solutions operating profit rose 48% to $356M in Q1 2026 on ethanol strength.
ADM expects a $150M 2026 earnings benefit from the 45Z clean fuel production credit.
ADM cited rising global ethanol adoption and strong blending economics supporting demand growth.
Archer Daniels Midland Company’s (ADM - Free Report) ethanol business has emerged as one of the company’s strongest growth engines, benefiting from a sharply improved margin environment and supportive biofuel policies. Management noted that tightening renewable fuel markets, rising Renewable Identification Number (RIN) values and stronger global demand significantly boosted profitability across both wet-milling and dry-milling ethanol operations in first-quarter 2026. The company also highlighted that export demand remained robust, supported by growing adoption of higher ethanol blends globally and increased focus on fuel security. These trends helped offset continued softness in starches and sweeteners volumes within the Carbohydrate Solutions segment.
The numbers clearly reflect the strength of the ethanol recovery. ADM’s Carbohydrate Solutions operating profit jumped 48% year over year in first-quarter 2026. Within the segment, Vantage Corn Processors’ operating profit surged significantly to $127 million, driven mainly by stronger ethanol margins and policy incentives.
Management stated that ethanol EBITDA margins per gallon improved by nearly $0.18 from the prior-year quarter. ADM also expects $150 million of earnings benefit in 2026 from the 45Z clean fuel production credit, up from its earlier estimate of $100 million. Additionally, export demand for ethanol is expected to reach nearly 2.4 billion gallons this year, compared with levels near 1 billion gallons several years ago.
ADM believes the current ethanol strength is not merely a short-term spike but part of a broader structural shift in global energy markets. The finalization of Renewable Volume Obligations (RVOs) for 2026 and 2027 accelerated biodiesel and renewable diesel production, increasing demand for soybean oil and supporting crush economics alongside ethanol margins.
Management also cited expanding international ethanol adoption, with countries such as Brazil moving toward E32 fuel blends and Vietnam increasing E10 usage. Strong domestic blending economics, where ethanol remains significantly cheaper than gasoline alternatives, are further supporting demand growth. These favorable policy and market conditions position ADM to continue benefiting from elevated ethanol profitability in the near term.
However, the sustainability of the growth trajectory will depend on several external variables. ADM acknowledged risks tied to energy costs, global trade dynamics, inflation, tariff uncertainty and future commodity price movements. The company also noted that ethanol margins remain influenced by volatile industry conditions, including geopolitical tensions and shifting supply-demand balances. Even so, management sounded increasingly confident about maintaining constructive ethanol dynamics through the remainder of 2026, supported by disciplined risk management, strong export trends and improving policy visibility. With ethanol now acting as a major earnings driver, ADM appears well-positioned to capitalize on the accelerating global transition toward lower-carbon fuel solutions.
ADM’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #2 (Buy) company have gained 31.4% in the past six months, outperforming both the industry and the broader Consumer Staples sector, which rose 15.1% and 3.9%, respectively.
ADM Stock's Six-Month Performance
Image Source: Zacks Investment Research
Is ADM a Value Play Stock?
From a valuation standpoint, ADM trades at a forward price-to-earnings ratio of 17.09X, higher than the industry’s average of 15.26X.
ADM P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Other Stocks to Consider
Fomento Economico Mexicano (FMX - Free Report) participates in the beverage industry through Coca-Cola FEMSA, which is the world’s largest franchise bottler for Coca-Cola products. FMX 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 FMX’s 2026 sales and earnings suggests growth of 17.2% and 81.7%, respectively, from the year-ago reported figures. The company delivered a trailing four-quarter negative earnings surprise of 17%, on average.
Vita Coco Company (COCO - Free Report) is a global beverage company best known for its Vita Coco coconut water brand, with a diversified portfolio spanning coconut-based products, plant-based alternatives, functional drinks and private-label offerings across retail, e-commerce and foodservice channels. COCO currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Vita Coco’s 2026 sales and earnings indicates growth of 21.4% and 47.9%, respectively, from the year-ago reported numbers. The company delivered a trailing four-quarter earnings surprise of 11.7%, on average.
Ambev S.A. (ABEV - Free Report) is a beverage company that produces and distributes beer, draft beer, soft drinks and other beverages across the Americas. ABEV currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Ambev’s 2026 sales and earnings implies growth of 19.2% and 16.7%, respectively, from the previous year’s reported numbers.
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Archer Daniels' Ethanol Margins Surge: Is Growth Now Sustainable?
Key Takeaways
Archer Daniels Midland Company’s (ADM - Free Report) ethanol business has emerged as one of the company’s strongest growth engines, benefiting from a sharply improved margin environment and supportive biofuel policies. Management noted that tightening renewable fuel markets, rising Renewable Identification Number (RIN) values and stronger global demand significantly boosted profitability across both wet-milling and dry-milling ethanol operations in first-quarter 2026. The company also highlighted that export demand remained robust, supported by growing adoption of higher ethanol blends globally and increased focus on fuel security. These trends helped offset continued softness in starches and sweeteners volumes within the Carbohydrate Solutions segment.
The numbers clearly reflect the strength of the ethanol recovery. ADM’s Carbohydrate Solutions operating profit jumped 48% year over year in first-quarter 2026. Within the segment, Vantage Corn Processors’ operating profit surged significantly to $127 million, driven mainly by stronger ethanol margins and policy incentives.
Management stated that ethanol EBITDA margins per gallon improved by nearly $0.18 from the prior-year quarter. ADM also expects $150 million of earnings benefit in 2026 from the 45Z clean fuel production credit, up from its earlier estimate of $100 million. Additionally, export demand for ethanol is expected to reach nearly 2.4 billion gallons this year, compared with levels near 1 billion gallons several years ago.
ADM believes the current ethanol strength is not merely a short-term spike but part of a broader structural shift in global energy markets. The finalization of Renewable Volume Obligations (RVOs) for 2026 and 2027 accelerated biodiesel and renewable diesel production, increasing demand for soybean oil and supporting crush economics alongside ethanol margins.
Management also cited expanding international ethanol adoption, with countries such as Brazil moving toward E32 fuel blends and Vietnam increasing E10 usage. Strong domestic blending economics, where ethanol remains significantly cheaper than gasoline alternatives, are further supporting demand growth. These favorable policy and market conditions position ADM to continue benefiting from elevated ethanol profitability in the near term.
However, the sustainability of the growth trajectory will depend on several external variables. ADM acknowledged risks tied to energy costs, global trade dynamics, inflation, tariff uncertainty and future commodity price movements. The company also noted that ethanol margins remain influenced by volatile industry conditions, including geopolitical tensions and shifting supply-demand balances. Even so, management sounded increasingly confident about maintaining constructive ethanol dynamics through the remainder of 2026, supported by disciplined risk management, strong export trends and improving policy visibility. With ethanol now acting as a major earnings driver, ADM appears well-positioned to capitalize on the accelerating global transition toward lower-carbon fuel solutions.
ADM’s Zacks Rank & Share Price Performance
Shares of this Zacks Rank #2 (Buy) company have gained 31.4% in the past six months, outperforming both the industry and the broader Consumer Staples sector, which rose 15.1% and 3.9%, respectively.
ADM Stock's Six-Month Performance
Image Source: Zacks Investment Research
Is ADM a Value Play Stock?
From a valuation standpoint, ADM trades at a forward price-to-earnings ratio of 17.09X, higher than the industry’s average of 15.26X.
ADM P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Other Stocks to Consider
Fomento Economico Mexicano (FMX - Free Report) participates in the beverage industry through Coca-Cola FEMSA, which is the world’s largest franchise bottler for Coca-Cola products. FMX 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 FMX’s 2026 sales and earnings suggests growth of 17.2% and 81.7%, respectively, from the year-ago reported figures. The company delivered a trailing four-quarter negative earnings surprise of 17%, on average.
Vita Coco Company (COCO - Free Report) is a global beverage company best known for its Vita Coco coconut water brand, with a diversified portfolio spanning coconut-based products, plant-based alternatives, functional drinks and private-label offerings across retail, e-commerce and foodservice channels. COCO currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Vita Coco’s 2026 sales and earnings indicates growth of 21.4% and 47.9%, respectively, from the year-ago reported numbers. The company delivered a trailing four-quarter earnings surprise of 11.7%, on average.
Ambev S.A. (ABEV - Free Report) is a beverage company that produces and distributes beer, draft beer, soft drinks and other beverages across the Americas. ABEV currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Ambev’s 2026 sales and earnings implies growth of 19.2% and 16.7%, respectively, from the previous year’s reported numbers.