Archer-Daniels-Midland Company (NYSE:ADM) came out with its annual results last week, and we wanted to see how the business is performing and what top analysts think of the company following this report. The result was positive overall – although revenues of US$65b were in line with what analysts predicted, Archer-Daniels-Midland surprised by delivering a statutory profit of US$2.44 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We’ve gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the ten analysts covering Archer-Daniels-Midland are now predicting revenues of US$66.7b in 2020. If met, this would reflect a reasonable 3.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to bounce 33% to US$3.27. Yet prior to the latest earnings, analysts had been forecasting revenues of US$66.6b and earnings per share (EPS) of US$3.26 in 2020. So it’s pretty clear that, although analysts have updated their estimates, there’s been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$48.31, showing that the business is executing well and in line with expectations. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Archer-Daniels-Midland, with the most bullish analyst valuing it at US$53.00 and the most bearish at US$38.00 per share. As you can see, analysts are not all in agreement on the stock’s future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Archer-Daniels-Midland’s past performance and to peers in the same market. One thing stands out from these estimates, which is that analysts are forecasting Archer-Daniels-Midland to grow faster in the future than it has in the past, with revenues expected to grow 3.1%. If achieved, this would be a much better result than the 3.6% annual decline over the past five years. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 2.7% next year. So while Archer-Daniels-Midland’s revenues are expected to improve, it seems that analysts are expecting it to grow at about the same rate as the overall market.
The Bottom Line
The most obvious conclusion from these results is that there’s been no major change in the business’ prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates – from multiple Archer-Daniels-Midland analysts – going out to 2023, and you can see them free on our platform here.
You can also see whether Archer-Daniels-Midland is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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