Monday, May 2, 2011

Archer Daniels Midland Co. (NYSE: ADM): Q3 Earnings Preview 2011

Archer Daniels Midland Co. (NYSE: ADM), the world’s largest grain processor, is scheduled to release its fiscal third-quarter earnings before the opening bell on Tuesday, May 3, 2010. Analysts, on average, expect the company to report earnings of 86 cents a share on revenue of $17.69 billion. In the year ago quarter, the company reported earnings of 72 cents per share on revenue of $15.14 billion.

Archer-Daniels-Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. Archer Daniels, one of the largest agricultural processors in the world, operates processing and manufacturing facilities, and processes crops to make food ingredients, animal feed ingredients, renewable fuels and naturally derived alternatives to industrial chemicals.

ADM is among the largest US ethanol producers, and has expanded its renewable business in Europe , Latin America and Asia. 

In the precedding fiscal second-quarter, the Decatur, Illinois based company's net income was $732 million, or $1.14 per share, compared to $567 million or 88 cents per share, in the year-earlier quarter. Net sales and other operating income rose to $20.93 billion from $15.91 billion in the prior-year quarter. Analysts, on average, expected the company to report earnings of 79 cents per share on revenue of $17.42 billion.

Prices for agricultural commodities continue to rise due in part to supply concerns over poor weather in certain growing areas. The rising middle classes of populous nations such as India and China are also affecting prices as the number of people improving their diet in those areas is increasing demand for high quality food. 

Companies involved in the producing and processing of products such as wheat, corn and soybeans have been making moves recently to try and improve their position in the market. The company recently agreed to buy the remaining 51 percent stake in Brazil's Limeira do Oeste ethanol mill, making it the plant's sole owner. 

Despite temporary setbacks, the long term fundamnetals of ethanol in specific and agricultural commodities as a whole remain intact.  

The company's stock currently trades at a forward P/E (fye 30-Jun-12) of 10.57 and PEG ratio (5 yr expected) of 1.42. In terms of stock performance, ADM shares have gained nearly 29 percent over the past year.

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