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Archer Daniels (ADM) Q3 Earnings Beat, Sales Miss Estimates

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Archer Daniels Midland Company (ADM - Free Report) reported mixed third-quarter 2018 results, wherein the bottom line outpaced the Zacks Consensus Estimate while the top line missed. However, both earnings and sales improved year over year. Notably, this marked the company’s fourth straight positive earnings surprise, with a sales miss after two consecutive beats.

In the past six months, this Zacks Rank #2 (Buy) stock has gained 11.4%, outperforming the industry’s 5% growth.


Q3 Highlights

Archer Daniels’ third-quarter adjusted earnings of 92 cents per share rose more than 100% from 45 cents earned in the year-ago quarter. Further, it outpaced the Zacks Consensus Estimate of 80 cents.

On a reported basis, the company’s earnings were 94 cents per share, significantly up from 34 cents in the prior-year quarter.

Revenues totaled $15,800 million, up 6.6% year over year. But, it missed the Zacks Consensus Estimate of $15,924 million. The upside was driven by robust growth strategies, along with solid sales across the company’s all major segments except for the Carbohydrate Solutions division.

Archer Daniels Midland Company Price, Consensus and EPS Surprise


Archer Daniels Midland Company Price, Consensus and EPS Surprise | Archer Daniels Midland Company Quote

Going by segments, quarterly revenues at Origination, Oilseeds and Nutrition were up 6.3%, 11.8%, and 4.2% to $5,850 million, $6,410 million, and $922 million, respectively. However, revenues at Carbohydrate Solutions and Other segments fell 2.8% and 14.3% to $2,534 million and $84 million, respectively.

Operational Discussion

Archer Daniels reported adjusted segment operating profit of $861 million in third-quarter 2018, up 59.1% from the year-ago quarter. On a GAAP basis, the company’s segment operating profit surged 81.6% year over year to $881 million.

On a segmental adjusted basis, adjusted operating profit at the Oilseeds segment rose significantly year over year to $349 million. The upside can be attributed to solid Crushing and Origination results. Moreover, this solid performance was supported by robust soybean crush volume, mainly in North America, EMEA and South America.

Moreover, the company witnessed significant growth in softseeds performance year over year, particularly in EMEA. Further, robust Wilmar results in Asia aided growth. Furthermore, edible oils remained sturdy in the reported quarter. However, growth was somewhat offset, with soft results at Refining, Packaging, Biodiesel and Other categories. Moreover, peanut shelling margins were down, attributable to higher peanut inventories and tough market conditions.

Further, adjusted operating profit at the Origination segment was $129 million, significantly up from $39 million in the year-ago quarter. This improvement was driven by gains from solid Merchandising and Handling results, as well as higher volume and margins in North America, amid a volatile price backdrop. Moreover, Global Trade’s effective utilization of the company’s network of origination assets beside continued expansion of robust marketing volume and margins aided the segment’s performance. Additionally, transportation results were more than double due to higher volume and margins in ARTCO.

However, Nutrition segment’s adjusted operating profit dipped 1.5% to $67 million as robust WFSI results were offset by soft performance at Animal Nutrition. In fact, the WFSI business delivered 10% growth in constant currency, with above 30% rise in operating profit. Furthermore, its EMEA and North America results remained sturdy on higher volume and portfolio mix. Emulsifiers and proteins also performed impressively in Specialty Ingredients. Further, the Health & Wellness business, with the inclusion of Protexin, performed well. However, lower lysine production volume, coupled with higher manufacturing costs and lower premix margins, hurt Animal Nutrition’s performance.

Carbohydrate Solutions segment’s adjusted operating profit declined 4% to $288 million. The downside can be attributed to elevated input and manufacturing expenses, which hurt North American liquid sweeteners. Bioproducts results were also down as gains from impressive ethanol risk management, and beverage and industrial alcohols were compensated by a weak ethanol industry margin backdrop. Issues at Decatur plant further impacted results in North America. However, this was offset by robust results at Starches and Sweeteners. Moreover, EMEA sweeteners benefited from latest acquisitions. Flour milling remained good as well.


Archer Daniels ended the quarter with cash and cash equivalents of $915 million, long-term debt, including current maturities of $7,320 million, and shareholders’ equity of $19,000 million.

In the nine months of 2018, the company generated negative cash flows of $3,680 million from operating activities.

Additionally, the company paid dividends worth $568 million to shareholders in the nine months of 2018.

Looking Ahead

Management remains impressed with its quarterly results, which benefited from its initiatives and cost-saving efforts. Moreover, Archer Daniels remains focused on five major platforms — animal nutrition, bioactives, carbohydrates, human nutrition and taste — along with geographic regions to drive growth.

The company remains focused on optimizing its core business and making investments to boost efficiency. Management remains optimistic about delivering impressive results, backed by improving market conditions, higher global demand, gains from U.S. tax reform, product innovations and Project Readiness.

Want More of Consumer Staples Stocks? Check These

The Chefs' Warehouse, Inc. (CHEF - Free Report) , with a long-term earnings growth rate of 19%, pulled off an average positive earnings surprise of 54.7% in the trailing four quarters. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lamb Weston Holdings, Inc. (LW - Free Report) delivered an average positive earnings surprise of 7% in the last four quarters and carries a Zacks Rank of 2.

Calyxt, Inc. (CLXT - Free Report) , also a Zacks Rank #2 stock, outpaced earnings estimates in the last two quarters.

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