Archer-Daniels-Midland Faces Significant Challenges: A Review of Recent Performance
Archer-Daniels-Midland Company (ADM), based in Chicago, Illinois, is a major player in the agricultural commodities market. The company handles the procurement, transportation, storage, processing, and sale of various agricultural products. With a market capitalization of $25 billion, ADM operates across the U.S. and several countries, including Switzerland, Brazil, and Canada.
Steep Declines Against the Market Benchmarks
Over the past year, ADM’s stock has notably lagged behind the broader market. It fell by 27.8% over 52 weeks, while the S&P 500 Index ($SPX) saw an impressive return of 35.9%. This year alone, ADM’s stock has dropped 27.5%, contrasting sharply with the S&P 500’s gain of 25.8% year to date.
When comparing ADM’s performance to the VanEck Agribusiness ETF’s (MOO), the trend remains concerning, as MOO experienced only a 2.2% decline in the last year and a 6.6% drop in 2024.
Impact of Leadership Changes and Financial Expectations
The beginning of 2023 was particularly tumultuous for ADM. On January 22, the company’s stock saw its largest single-day drop since 1929, plummeting over 24%. This drop occurred after ADM placed its CFO Vikram Luthar on administrative leave amid an investigation into the accounting practices within its Nutrition segment, causing widespread panic among investors.
Recent trading sessions have not offered much respite. On November 4, the stock fell nearly 6% following the release of preliminary third-quarter results. Due to challenging market conditions, ADM anticipates a substantial 39.8% year-over-year decrease in adjusted net earnings, predicting approximately $530 million for the quarter. All segments are facing declining operating profits, particularly the Ag Services and Oilseeds segment, which has seen a staggering 43% drop to $480 million. In light of this disappointing trend, ADM lowered its full-year adjusted EPS guidance to a range of $4.50 to $5, adding to investor anxiety.
Analysts’ Perspectives and Ratings
As we approach the end of the fiscal year in December, analysts project a 29.8% year-over-year decline in adjusted EPS for ADM, estimating about $4.90. The company’s earnings history shows mixed results; it has missed Wall Street’s earnings estimates twice in the last four quarters and exceeded them on two other occasions. In the most recent quarter, ADM’s adjusted EPS of $1.03 fell short of expectations by 16.3%.
The consensus among analysts currently stands at a “Hold” rating. Out of nine analysts covering ADM stock, eight recommend a “Hold,” while one suggests a “Strong Sell.”
Price Targets Indicate Some Optimism
Despite the current struggles, there are indications of potential upside. On November 5, Morgan Stanley (MS) analyst Steven Haynes maintained a “Hold” rating for ADM with a price target of $57. The mean price target stands at $60.12, reflecting a potential upside of 14.8% from current levels. Furthermore, the highest target among analysts is set at $66, suggesting a possible gain of 26.1%.
More Stock Market News from Barchart
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
