How High Can ADM Earnings Grow?

Archer Daniels Midland (NYSE: ADM  ) will release its quarterly report on Tuesday, and investors have gotten increasingly enthusiastic about the agriculture company's stock recently. With so many favorable trends supporting the agricultural industry, ADM earnings look poised to deliver the growth that shareholders have come to expect from the company.

ADM has an extensive business whose vertical integration includes farming operations, food processing plants, and biofuel production facilities. Its size gives it an important competitive advantage, but even ADM isn't immune from the pressures and uncertainties that are always present in agriculture. Let's take an early look at what's been happening with Archer Daniels Midland over the past quarter and what we're likely to see in its quarterly report.

Stats on Archer Daniels Midland

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$22.87 billion

Change From Year-Ago Revenue


Earnings Beats in Past Four Quarters


Source: Yahoo! Finance.

Will ADM earnings grow like weeds this quarter?
Analysts have pruned their view on ADM earnings in recent months, with a $0.03 per share cut in June-quarter estimates and more than double that reduction for their full-year 2013 consensus. The stock, though, has risen to new multi-year highs, gaining more than 10% since the end of April.

One potentially huge growth driver for ADM is its planned $3.5 billion acquisition of Australia's GrainCorp, expanding its international reach. Earlier this week, the company got European Commission approval for the transaction, and while some other regulatory hurdles remain, ADM seems increasingly likely to get the deal done.

However, trouble on the ethanol front could hurt ADM's long-term prospects. Lawmakers are looking to amend the Renewable Fuel Standard, which has supported huge growth in biofuel production from ADM and Valero (NYSE: VLO  ) and their combined ethanol production capacity of about 3 billion gallons annually, representing a quarter of U.S. production. With the potential to remove corn-based ethanol from the law entirely, tiny rival KiOR (NASDAQOTH: KIORQ  ) might see new support for its cellulosic ethanol production, but the negative impact at ADM and Valero would be far greater.

The near-term question for ADM is how weather affects the company's results. Last week, Bunge (NYSE: BG  ) reported a big drop in earnings due to weak harvests in its international markets, but it believes that U.S. harvests will be large and eventually lead to increased trading activity. Yet with a cold, wet spring, those results might take longer to materialize than previously expected, forcing ADM shareholders to be patient in waiting for a payoff from this year's rebound from last year's U.S. drought conditions.

In the ADM earnings report, look for the company to give its strategic vision for the long-awaited GrainCorp acquisition as well as updates on how it plans to handle its ethanol business going forward. With demographics still favoring agriculture over the long run, any pullback in ADM stock could well be the buying opportunity patient investors have waited for.

There's one resource that's just as important as food, and one emerging company already has the market on it cornered... and stands to make in-the-know investors boatloads of cash. We reveal all in our special 100% FREE report "The 21st Century's Most Precious Natural Resource". Just click here for instant access!

Click here to add Archer Daniels Midland to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2576328, ~/Articles/ArticleHandler.aspx, 9/30/2016 8:25:12 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:04 PM
ADM $42.17 Up +0.64 +1.54%
Archer Daniels Mid… CAPS Rating: ****
BG $59.23 Up +0.47 +0.80%
Bunge CAPS Rating: ***
KIORQ $0.00 Down +0.00 +0.00%
KiOR INC CAPS Rating: No stars
VLO $53.00 Up +1.29 +2.49%
Valero Energy CAPS Rating: ****