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Archer Daniels (ADM) Q1 Earnings & Revenues Surpass Estimates

Archer Daniels Midland Company ADM has posted impressive first-quarter 2023 results. The top and bottom lines advanced year over year and beat the Zacks Consensus Estimate. Results have been bolstered by strong margins across the Ag Services & Oilseeds, and Carbohydrate Solutions segments, continued strength in the Nutrition unit and a solid product portfolio.

Q1 Highlights

Archer Daniels’ adjusted earnings of $2.09 per share in the first quarter outpaced the Zacks Consensus Estimate of $1.71 and our estimate of $1.62. The figure also jumped 10% from $1.90 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $2.12 per share, up 14% from the prior-year quarter’s $2.12.

Revenues advanced 1.8% year over year to $24,072 million, surpassing the Zacks Consensus Estimate of $23,480 million and our estimate of $23,617.5 million.

Segment-wise, revenues for Ag Services & Oilseeds grew 1.8% year over year, whereas Carbohydrate Solutions’ revenues rose 5.1% year over year. However, Nutrition witnessed a year-over-year revenue decline of 3.7%.

The gross profit increased 9.6% year over year to $2,080 million, while the gross margin expanded 60 basis points (bps) to 8.6% in the quarter under review. SG&A expenses rose 6.3% to $881 million.

Archer Daniels has reported an adjusted segmental operating profit of $1,725 million in first-quarter 2023, up 11% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits grew 11.7% year over year to $1,719 million.

Archer Daniels Midland Company Price, Consensus and EPS Surprise

 

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Archer Daniels Midland Company price-consensus-eps-surprise-chart | Archer Daniels Midland Company Quote

Segmental Operating Profit

Adjusted operating profit for Ag Services & Oilseeds rose 20% year over year to $1,210 million. This can be attributable to strength across the South America region, driven by excellent risk management and solid export demand due to record Brazilian soybean crop. Then again, stronger soybean exports aided North America origination. The Global Trade performance gained from solid margins and efficient execution.

Crushing results remained flat year over year. Strong soybean and softseed crush margins stemming from robust demand for renewable fuels contributed to the results in North America. The performance in the EMEA region was drab year over year due to trade flows adjusted from the dislocations caused last year by the war in Ukraine.

Refined Products and Other results have been strong year over year, benefiting from record volumes and strong margins in North America biodiesel, as well as robust demand for food oil and export demand for biodiesel in EMEA. Also, equity earnings from Wilmar were lower than that in the year-earlier quarter.

The Carbohydrate Solutions segment’s adjusted operating profit declined 14% to $273 million. The Starches and Sweeteners sub-segment, including ethanol production from the wet mills, has recorded improved year-over-year results. This mainly resulted from solid volumes and strong margins in the North America region, which partly offset lower ethanol margins. Meanwhile, robust margins aided the EMEA region. The global wheat milling business witnessed higher margins, driven by solid demand.

Vantage Corn Processors’ results have been soft due to higher ethanol inventory levels, which, in turn, dented the margins.

In the Nutrition segment, the adjusted operating profit of $145 million fell 23% from $189 million in the year-ago quarter. The Human Nutrition unit was flat year over year. The Flavors unit was drab due to sluggish results in North America, while sturdy margins aided the Specialty Ingredients unit. The Health & Wellness business remained weak year over year.

The Animal Nutrition unit was weak year over year due to lower margins in amino acids.

Other Financials

This Zacks Rank #3 (Hold) player ended the quarter with cash and cash equivalents of $899 million; long-term debt, including current maturities, of $8,697 million; and shareholders’ equity of $24,896 million. As of Mar 31, 2023, ADM used $1,610 million in cash for operating activities. It repurchased shares worth $351 million and dividends of $248 million in the reported quarter.

 

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We note that shares of ADM have lost 4.8% in the past three months compared with the industry’s 10.5% decline.

Consumer Staple Stocks Worth a Look

Some better-ranked stocks are Inter Parfums IPAR, General Mills GIS and KimberlyClark KMB

IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial year’s sales and earnings suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.

General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.

The Zacks Consensus Estimate for General Mills’ current financial year’s sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.

KimberlyClark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.

The Zacks Consensus Estimate for KimberlyClark’s current financial year’s sales and earnings suggests growth of 2% and 5.2%, respectively, from the year-ago reported numbers.

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