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Factors to Know Ahead of Archer Daniels' (ADM) Q1 Earnings

Zacks Equity Research

Archer Daniels Midland Company ADM is slated to report first-quarter 2020 results on Apr 29, after market close. The company delivered a positive earnings surprise of 79.8% in the last reported quarter. Moreover, its earnings outperformed the Zacks Consensus Estimate by 16.8%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for first-quarter earnings has moved south by 5 cents to 58 cents in the past 30 days. This suggests growth of 26.1% from the year-ago period’s reported figure. Further, the consensus mark for revenues is pegged at $15,170 million, indicating a decrease of 0.9% from the figure reported in the year-ago quarter.

Factors to Note

Archer Daniels’ three strategic pillars — optimize the core, drive efficiency and grow strategically — as well as focus on Project Readiness bode well. The company’s Readiness goals of improving the business, standardizing functions and enriching consumers’ experience are well on track and likely to have boosted the first-quarter bottom line. 

Moreover, its nutrition segment’s performance has been strong. The nutrition business is likely to have benefited from the buyout of natural plant-based extracts maker — Yerbalatina Phytoactives. Also, gains from the Neovia acquisition have been aiding its animal nutrition division. During the fourth-quarter earnings call, management predicted first-quarter 2020 operating profit for the nutrition segment to be roughly 20%. 

However, sluggishness in ethanol margins might have acted as a deterrent. This is likely to have led to a sequential decline in the Carbohydrate Solutions segment. Apart from these, Archer Daniels has been grappling with softness in the Ag Services and Oilseeds segment. During the last earnings call, management guided a considerable year-over-year decline in Ag Services and Oilseeds for the first quarter of 2020. All these factors along with adverse impacts from rising costs and a higher debt level are likely to have dented the quarterly performance.

Archer Daniels Midland Company Price and EPS Surprise

Archer Daniels Midland Company Price and EPS Surprise

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

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Archer Daniels this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Archer Daniels carries a Zacks Rank #3, its Earnings ESP of -3.45% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Church & Dwight Co. CHD currently has an Earnings ESP of +8.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kellogg Company K presently has an Earnings ESP of +3.83% and a Zacks Rank #2.

Philip Morris International PM currently has an Earnings ESP of +7.22% and a Zacks Rank #3.

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