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Is Archer Daniels (ADM) Poised for Earnings Beat in Q3?

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Archer Daniels Midland Company (ADM - Free Report) is slated to report third-quarter 2018 results on Nov 6. The company delivered positive earnings surprise in three of the trailing four quarters, with an average beat of 18.6%.

The Zacks Consensus Estimate for third-quarter earnings is pegged at 78 cents, mirroring year-over-year growth of 73.3%. Estimates have moved north in the past 30 days. Moreover, the Zacks Consensus Estimate for quarterly revenues is pegged at $15.92 billion, up 7.4% from the year-ago figure.

How Things Are Placed Before 3Q18 Earnings

Archer Daniels put up a stellar show in the first two quarters of 2018, with earnings and sales beating estimates and improving year over year. Notably, in second-quarter 2018, the company delivered third straight positive earnings surprise and second consecutive sales beat. Results were aided by the company’s strategic initiatives and cost-saving efforts.

Archer Daniels is undertaking measures to manage its business portfolio, which are expected to help in realizing value and enhance returns. The company’s progress on its portfolio management initiatives, cost-savings plan and Readiness program resulted in its recent success.

The company is on track with its business transformation under its 1ADM program, which is an integral part of Project Readiness. The company expects Readiness to help management have more coordinated approach toward driving business improvement, standardizing functions and enriching consumers’ experience. Further, as part of this plan, the company intends to allocate resources efficiently on more mature businesses and make prudent investments.

The company rolled out the 1ADM plan to ocean freight and European corporate finance operations. It remains on track with further 1ADM rollouts to cover the entire enterprise in 2018.

Moreover, the company remains focused on strengthening its business through increased cost savings, which is a key component of its long-term strategy. Archer Daniels targets $550 million in additional run rate cost savings over the next five years, including cost savings of $350 million from operational excellence and process enhancements, and about $200 million in incremental savings on purchasing.

These sound strategies have helped shares of Archer Daniels to surge 17.9% year to date, outperforming the industry’s 5.9% increase.


Archer Daniels is optimistic about delivering solid results in the second half of 2018 on improving market conditions, higher global demand, gains from strategies and product innovations. Going by segments, management expects Origination, Oilseeds and Nutrition results to improve in the third quarter on a year-over-year basis. The company is also on track to exceed the $200-million savings target for 2018, with more than $150 million generated in the first half.

However, softness in its Carbohydrate Solutions segment due to weaker ethanol business results is concerning. In the second half of 2018, the Carbohydrate Solutions segment’s results are projected to be lower year over year on weaker results from the ethanol business.

Nevertheless, Archer Daniels’ smooth progress on portfolio management initiatives and cost-savings plan, as well as Readiness program, is anticipated to aid upcoming quarterly results.

Zacks Model

Our proven model shows that Archer Daniels is likely to beat earnings estimates in the third quarter. This is because it has the requisites for a beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). 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 #1, which raises the chances of an earnings beat. Additionally, the company’s Earnings ESP of +3.85% makes us confident of a beat.

Other Stocks With Favorable Combination

Here are some other companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Turning Point Brands, Inc. (TPB - Free Report) has an Earnings ESP of +8.74% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nu Skin Enterprises, Inc. (NUS - Free Report) has an Earnings ESP of +0.21% and a Zacks Rank of 3.

Monster Beverage Corporation (MNST - Free Report) has an Earnings ESP of +3.01% and a Zacks Rank #3.

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