Archer Daniels Midland Co. Earnings: Margins Shrink as Net Income Drops

S&P 500 (NYSE:SPY) component Archer Daniels Midland Co. (NYSE:ADM) reported its results for the second quarter. Archer Daniels Midland processes feedstuffs including oilseeds, cocoa, corn, and wheat. The company also manufactures vegetable oil and protein meal, corn sweeteners, flour, ethanol, biodiesel, and other food and feed ingredients.

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Archer Daniels Midland Earnings Cheat Sheet for the Second Quarter

Results: Net income for the farm products company fell to $80 million (12 cents per share) vs. $732 million ($1.14 per share) a year earlier. This is a decline of 89.1% from the year earlier quarter.

Revenue: Rose 11.4% to $23.31 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: ADM reported adjusted net income of 51 cents per share. By that measure, the company fell short of mean estimate of 78 cents per share. Analysts were expecting revenue of $23.1 billion.

Quoting Management: “It was a tough quarter,” said ADM Chairman and CEO Patricia Woertz. “The operating environment was challenging. Ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results hurt our second quarter profits. “We remain optimistic about the long-term fundamentals of our business and the growing earnings power of our company,” added Woertz. “We continue to execute our plan to drive shareholder value: prioritizing capital projects, implementing productivity measures and returning capital to shareholders through increased dividends and share buybacks.”

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 30.3%, with the biggest boost coming in the fourth quarter of the last fiscal year when revenue rose 45.6% from the year earlier quarter.

Gross margin shrank 2.4 percentage points to 3.5%. The contraction appeared to be driven by increased costs, which rose 14.2% from the year earlier quarter while revenue rose 11.4%.

The company has now fallen short of analyst estimates for the last three quarters. It missed the mark by one cent in the first quarter and by 26 cents in the fourth quarter of the last fiscal year.

Net income has dropped 0.8% year over year on average across the last five quarters. Performance was hurt by an 89.1% decline in the most recent quarter from the year earlier quarter.

Looking Forward: The average estimate for the third quarter is steady at 79 cents a share. The average estimate for the fiscal year is $2.98 per share, down from $3.08 ninety days ago.

Competitors to Watch: Bunge Limited (NYSE:BG), MGP Ingredients, Inc. (NASDAQ:MGPI), Corn Products Intl., Inc. (NYSE:CPO), CHS Inc. (NASDAQ:CHSCP), General Mills, Inc. (NYSE:GIS), SunOpta, Inc. (NASDAQ:STKL), Gruma S.A.B. de C.V. (NYSE:GMK), TreeHouse Foods Inc. (NYSE:THS) and Seaboard Corporation (AMEX:SEB).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com