Supermarket on Sale

Self-titled "supermarket to the world," agro-powerhouse Archer Daniels Midland (NYSE: ADM  ) experienced a huge growth spurt on Friday -- in its reported earnings and in its share price. Shares shot up as high as 10% on the company's news that the financial weather was unseasonably mild in ADM's fiscal first quarter of 2005, with a small but healthy amount of dividend precipitation.

So, here's today's farming news:

Quarterly sales grew 13% year-on-year; profits sprouted 77%; at $0.41 per diluted share, the per-share profits eked out an extra 1% for 78% total. (Ordinarily, when you see a result like this, you should look for that glorious event, stock concentration, to have taken place. But in ADM's case, the opposite proved true, with the share count actually rising 1%. In short, per-share results bettered net results through the "rounding" process that takes place when breaking billion-dollar profits down to the per-share level.)

The fertilizer for the growth in profits: revenue growth, certainly, but also a healthy rise in gross margins, from 5.7% to 7.4%. As we saw recently with wholesaler BJ's (NYSE: BJ  ) and discount retailerMen's Wearhouse (NYSE: MW  ) , when a low-margin business (as the growing of food certainly is) can eke out even a modest hike in margins, huge gains result.

But that's not the whole story, or even the best part. Free cash flow at ADM grew like Jack's mythical beanstalk this past quarter, rising 17 times from Q1 2004's $47.5 million to reach $857.2 million -- just shy of a Nucor (NYSE: NUE  ) -like double decuple, and a little better than the results recently posted by fellow (can't really say "peer" for something this tiny) agricultural products seller Lucille Farms (Nasdaq: LUCY  ) .

Now consider that according to information provided by Yahoo! (Nasdaq: YHOO  ) Finance -- information that many investors use to screen for likely investment prospects -- ADM is currently still scoring a negative number for its trailing 12 months free cash flow. That ends today, and it could well put ADM back on investors' radar.

For further Foolish farming facts, read:

Fool contributorRich Smith has no interest in any of the companies mentioned in this article.


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