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Bank of America Merrill Lynch Downgrades Archer-Daniels Midland

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Price movement of Archer-Daniels Midland

Archer-Daniels Midland (ADM) has a market cap of $22.1 billion. ADM fell by 1.4% to close at $37.14 per share on March 7, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were 6.2%, 9.4%, and 2.2%, respectively.

Currently, ADM is trading 8.9% above its 20-day moving average, 8.9% above its 50-day moving average, and 10.6% below its 200-day moving average.

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 was 8.9% as of March 4, 2016.

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

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

  • Bunge (BG): $7.9 billion
  • Ingredion (INGR): $7.6 billion

Bank of America Merrill Lynch downgraded ADM

Bank of America Merrill Lynch has downgraded Archer-Daniels Midland’s rating to “neutral” from “buy.”

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Performance of ADM in 4Q15 and 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%, and 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.

ADM’s 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 0.32x in fiscal 2015 compared to 0.28x in fiscal 2014.

The price-to-earnings and price-to-book value ratios for ADM are 12.4x and 1.3x, respectively, as of March 7, 2016.

In the next part of the series, we’ll look at Fiat Chrysler Automobiles and how it extended the shutdown of its Chrysler plant to meet demand.

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