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Argus Downgraded Archer-Daniels Midland to ‘Hold’

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Dec. 4 2020, Updated 10:52 a.m. ET

Price movement of Archer-Daniels Midland

Archer-Daniels Midland (ADM) has a market cap of $19.3 billion. ADM rose by 2.6% to close at $32.45 per share as of February 12, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases are -3.9%, -2.2%, and -10.7%, respectively.

Technically, the stock has broken the support and is trading below all moving day averages. Currently, ADM is trading 1.3% below its 20-day moving average, 5.2% below its 50-day moving average, and 24.0% below its 200-day moving average.

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The FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) invests 3.4% of its holdings in ADM. The ETF tracks an index of companies that operate, manage, or produce natural resources in energy, gas, precious or industrial metals, timber, and water. The YTD price movement of GUNR is -7.0% as of February 11, 2016.

The iShares MSCI USA Value Factor (VLUE) invests 2.2% of its holdings in ADM. The ETF tracks an index of large- and mid-cap US equities. Stocks are selected and weighted using fundamental metrics such as earnings, revenue, book value, and cash earnings. It aims for exposure to undervalued stocks in each sector.

The market cap of ADM’s competitors are as follows:

  • Bunge (BG) — $7.3 billion
  • Ingredion (INGR) — $7.0 billion

Argus downgraded ADM

Argus has downgraded ADM’s rating from “buy” to “hold” due to the fall in performance in fiscal 2015.

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Performance of ADM in fiscal 4Q15 and fiscal 2015

ADM reported 4Q15 revenues of $16,445.0 million, a fall of 21.3% compared to revenues of $20,894.0 million in fiscal 4Q14. Revenue from agricultural services, corn processing, oilseeds processing, and wild flavors and specialty ingredients fell by 22.1%, 20.2%, 22.4%, and 3.6%, respectively, in fiscal 4Q15 compared to revenue in fiscal 4Q14.

Its net income and EPS (earnings per share) rose to $718.0 million and $1.19, respectively, in fiscal 4Q15, compared to $701.0 million and $1.08, respectively, in fiscal 4Q14.

The company has declared a quarterly cash dividend of $0.30 per share on its common stock. This dividend is payable on March 8, 2016, to shareholders of record at the close of business on February 16, 2016.

Fiscal 2015 results

In fiscal 2015, ADM reported revenues of $67,702.0 million, a fall of 16.6% YoY (year-over-year). The processed volumes of oilseeds rose by 5.0%. Processed volumes of corn and milling and cocoa fell by 2.5% and 2.3%, respectively, in fiscal 2015.

The company’s net income and EPS fell to $1,849.0 million and $2.98, respectively, in fiscal 2015, compared to $2,248.0 million and $3.43, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents and operating working capital fell by 17.2% and 9.0%, respectively, in fiscal 2015. Its long-term debt-to-equity ratio rose to 0.32 in fiscal 20115 compared to 0.28 in fiscal 2014.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of ADM are 10.9x and 1.1x, respectively, as of February 12, 2016.

ADM has entered into an agreement to purchase a controlling stake in Harvest Innovations. The transaction will close in the coming months, subject to regulatory approval.

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