Archer Daniels Midland Co. Earnings: Margins Suffer as Costs Rise, Profit Falls

S&P 500 (NYSE:SPY) component Archer Daniels Midland Co. (NYSE:ADM) reported its results for the third 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 Third Quarter

Results: Net income for the agriculture/products fell to $399 million (60 cents per share) vs. $578 million (86 cents per share) a year earlier. This is a decline of 31% from the year-earlier quarter.

Revenue: Rose 5.4% to $21.16 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Archer Daniels Midland Co. fell short of the mean analyst estimate of 62 cents per share. Analysts were expecting revenue of $21.38 billion.

Quoting Management: “This quarter, we delivered very good results despite difficult margin environments, particularly in ethanol and European oilseeds,” said ADM Chairman and CEO Patricia Woertz. “The strong third quarter last year set a high bar, and this quarter represents a solid performance by the team.”

Key Stats:

The company has now missed analyst estimates for the last four quarters. It fell short by 26 cents in the second quarter, by one cent in the first quarter, and by 26 cents in the fourth quarter of the last fiscal year.

Gross margin shrank one percentage points to 4.8%. The contraction appeared to be driven by increased costs, which rose 6.5% from the year earlier quarter while revenue rose 5.4%.

Revenue has risen for the last four quarters. Revenue increased 11.4% to $23.31 billion in the second quarter. The figure rose 30.4% in the first quarter from the year earlier and climbed 45.6% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 89.1% from the year-earlier quarter.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 70 cents per share, down from 80 cents ninety days ago. The average estimate for the fiscal year is $2.53 per share, down from $2.94 ninety days ago.

Competitors to Watch: Bunge Limited, MGP Ingredients, Inc., Corn Products Intl., Inc., CHS Inc., General Mills, Inc., SunOpta, Inc., Gruma S.A.B. de C.V., TreeHouse Foods Inc., Seaboard Corporation, and Alexandria Mills & Bakeries Co.

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

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