Archer Daniels Held at Neutral - Analyst Blog
19 Febbraio 2013 - 11:50AM
Zacks
We have retained our Neutral stance on Archer Daniels
Midland Co. (ADM). The company’s strong quarterly
performance and continuous focus on enhancing its processing
capabilities and global footprint are its strengths. However, we
remain on the sidelines due to the projected rise in raw material
prices in the near-term and expected decline in demand for
corn-based ethanol.
Why the Reiteration?
Archer Daniels is one of the leading players in the global food
processing industry and commands a massive network of more than 680
processing and sourcing facilities and 27,000 vehicles operating
across the Americas, Europe and Asia for transportation of
agricultural commodities. This provides a strong competitive
advantage to the company and strengthens its well-established
position in the market.
Archer Daniels posted strong results for the quarter ended Dec 31,
2012, as adjusted earnings of 60 cents per share rose 17.6% from
the year-ago quarter earnings of $0.51 per share. Net sales of
$24,921 million improved 6.9% year over year mainly driven by
robust performances at Oilseeds and Agricultural Services segments,
partially offset by weak results at the company’s Corn Processing
segment.
Moreover, Archer Daniels remains extensively focused on enhancing
its processing capacities, which includes expanding crushing
capacities in North America, and fertilizer blending and biodiesel
capacities in South America. In Europe, the company has acquired
processing facilities in Czech Republic and Germany and 3 storing
facilities in Slovakia. Further, the company is in talks to acquire
GrainCorp, aiming to boost its market share in Australia.
In addition, in order to tap the growing global demand for crops
and agricultural products, Archer Daniels is expanding its global
footprint in the emerging markets, especially Asia. These
initiatives offer a strong upside potential to the company in the
long run.
However, we remain slightly cautious on the stock as we believe
that the company’s margins may shrink further in the near-term due
to rising oilseeds and corn prices resulting from weak agricultural
produce in the U.S. Further, U.S. has imported higher sugar-based
ethanol from Brazil to meet the growing demand of ethanol, which
may adversely affect the demand for Archer Daniels’ corn-based
ethanol.
Other Stocks to Consider
Besides Archer Daniels, which holds a Zacks Rank #3 (Hold), other
stocks worth considering in the Farm products industry are
ConAgra Foods Inc. (CAG), Flowers Foods
Inc. (FLO) and J&J Snack Foods Corp.
(JJSF), all of which hold a Zacks Rank #1 (Strong Buy).
ARCHER DANIELS (ADM): Free Stock Analysis Report
CONAGRA FOODS (CAG): Free Stock Analysis Report
FLOWERS FOODS (FLO): Free Stock Analysis Report
J&J SNACK FOODS (JJSF): Free Stock Analysis Report
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