Archer Daniels Midland Company (ADM) has received “hold” ratings from ~77% of surveyed Wall Street analysts as of April 4, 2016. Approximately 15% of analysts have given it “buy” ratings, and 8% have given it “sell” ratings.
The average target price for ADM fell from $37.11 to $36.78 following the company’s announcement of the sale of its Brazilian plant. ADM’s target price demonstrates that it has the potential to rise by 2% compared to its April 4 closing price of $36.04.
The company’s target price also lowered from $42.50 to $39.80 after it reported a disappointing 4Q15.
Recommendations for ADM
As of April 4, 2016, Macquarie assigned ADM a “strong buy” rating with the highest target price of $40. This is 11% higher than ADM’s April 4 closing price. On April 4, Morningstar upgraded ADM to a “strong buy” from its earlier “hold” rating.
Goldman Sachs and Credit Suisse have each given the second-highest target price of $39 to ADM. This is 8% higher than its April 4 closing price. Both companies rate the stock as a “hold.”
How is ADM valued?
A valuation multiple helps investors to decide whether to enter or exit a stock. A forward PE (price-to-earnings) valuation multiple indicates how much an investor is willing to pay for a company’s next four quarters of EPS (earnings per share).
ADM is trading at a lower forward PE multiple than Bunge and the Market. ADM has a forward PE multiple of 13.6x for the next 12 months as of April 4. Falling growth estimates for ADM’s revenue and earnings in 2016 justify the lower PE multiple.
Wall Street expects ADM’s earnings and revenue to fall by 4% and 1%, respectively, in 2016.
The FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) invests 3.4% of its holdings in ADM. The First Trust Consumer Staples AlphaDEX ETF (FXG) invests 3.0% of its holdings in ADM. It also invests 3.2% in INGR and 1.5% in BG.