To The Moon

$Archer-Daniels Midland(ADM)$

ADM's third-quarter results were poor, missing expected earning with Reported 1.091and Estimate 1.238. Decline in revenue and profit with Carbohydrate Solutions performing well, while Ag Services and Oilseeds, and Nutrition businesses faced challenges due to softer market conditions.

Company overview

Archer Daniels Midland Company (ADM) is a global leader in food processing and commodities trading.

ADM operates more than 270 plants and 420 crop procurement facilities worldwide. The company processes cereal grains and oilseeds into products used in food, beverage, nutraceutical, industrial, and animal feed markets1. ADM also provides agricultural storage and transportation services.

Recent Developments:

ADM continues to focus on sustainability and innovation, offering sustainable, innovative solutions to meet the world's most fundamental needs for food, drink, and more. The company is committed to unlocking the power of nature to enrich the quality of life.

Business Challenges

Archer Daniels Midland Company (ADM) is currently facing several challenges:

• Accounting Errors: ADM recently discovered additional accounting irregularities, leading to a restatement of its financial statements for 2023 and the first two quarters of 2024. This has resulted in a significant drop in stock value and investor confidence.

• Profit Forecast Cut: Due to these accounting issues and softer market conditions, ADM has lowered its 2024 adjusted earnings per share (EPS) forecast to the range of $4.50 to $5.00, down from the previous estimate of $5.25 to $6.25.

• Operational Challenges: ADM's Ag Services and Oilseeds segment saw a 43% decline in operating profits due to unfavorable market conditions, particularly in South America. The Nutrition segment also struggled, with a 19% decline in operating profit.

• Leadership Changes: The accounting irregularities led to the departure of CFO Vikram Luthar and increased pressure on the company's leadership team.

• Market Volatility: ADM's profits have been affected by the volatility in commodity prices, such as corn and soybeans, which have reached near four-year lows.

• Market Conditions: ADM's Ag Services and Oilseeds segment has been impacted by softer market conditions, particularly in South America. The Nutrition segment has also faced challenges due to weaker market condition.

Despite these challenges, ADM continues to focus on sustainability and innovation, aiming to drive long-term growth and improve its financial performance.

Business Outlook & Direction

ADM's leadership is committed to addressing these issues and improving internal controls to ensure accuracy and transparency in financial reporting. The company is also focusing on strategic initiatives to drive long-term growth and enhance shareholder returns.

• Operational Performance: Despite these challenges, ADM's Carbohydrate Solutions segment has shown strong results. The company is focusing on improving performance and driving continued value creation.

• Cash Flow: ADM's year-to-date cash flows from operating activities are expected to be $2.468 billion, with cash flows from operations before working capital at $2.341 billion. This indicates a strong cash flow position despite the challenges.

Adm business direction

Archer Daniels Midland Company (ADM) has outlined a strategic plan focused on sustainable earnings growth and value creation for shareholders. Here are the key directions for ADM's business in 2024 and beyond:

• Managing the Cycle: ADM aims to navigate market cycles effectively, ensuring stability and growth even in challenging market conditions.

• Nutritional Recovery: The company is focusing on enhancing its nutrition business, aiming to double its profitability to a range of $1.25 billion to $1.5 billion by 2025.

• Enhanced Return of Cash to Shareholders: ADM plans to return more cash to shareholders through dividends and share repurchases. The company targets a dividend payout ratio of 30-40% of earnings and about $5 billion in share repurchases over the plan horizon.

• Sustainability Initiatives: ADM is committed to reducing its Scope 3 greenhouse gas emissions by 25% by 2035 from a 2019 baseline. The company is also working on enhancing sustainable farming practices and introducing carbon-neutral solutions.

• Innovation and Productivity: ADM continues to invest in productivity and innovation across all its business units to drive profit growth and create value for shareholders.

These strategic priorities are designed to position ADM for long-term growth and success, aligning with enduring global trends and sustainability goals.

ADM Average Dividend Yield Chart

Market sentiment

ADM Stock Performance has seen some fluctuations, with yesterday trading around $48-52. The stock has experienced a decline of over 10% since October, 2024. Analyst Ratings: Out of 13 Wall Street analysts, the consensus rating for ADM is "Reduce". One analyst has given a sell rating, while 12 have given a hold rating. The consensus price target is $63.82, indicating a potential upside of 20%. Investor Sentiment has been affected by recent accounting irregularities and a lowered profit forecast for 2024. These factors have led to some uncertainty and cautiousness among investors.

Risk & Reward

Now you have to see how this risk and reward fits your portfolio I personally think will put this on a covered stock. Now we have slowing down food prices a recession here and there a market sale or something this could go a little bit lower let's say that in a bad year they don't make two billion they make 1.5 times pe ratio of 10 to 15 I get to 20 billion which is not far but a little bit lower than the current situation and then I will check it again and see whether it is a buy for me but for now Wall Street analyst gave you a gift if you're looking for a long-term strong business food prices this might push it lower for a while food prices have been declining since the peak in 2020 when they made a lot of money and if it normalizes a little bit then they go back to the 1.52 billion but that's normal with food over the long term you see inflation giving it a push but there are good times bad times good times bad times great times this is normal and these Cycles are there but the key is that without farming you would be hungry naked and sober so see how this fits your portfolio it's a business that I know very well it's a good business it's an essential business so very hard that something will replace the infrastructure they have there is some competition so there is the volatility in the Cycles depending on the year on the prices on the margins but over time they have been growing acquiring of course such big companies there will always be some issues but you have to see how this good business at a fair price how that fits your portfolio.