ADM Hurdles a Pretty Low Bar

On a GAAP basis, the company posted EPS of $0.28, down sharply from $0.68 in the third quarter of 2011.

The company’s CEO said:

Our first-quarter segment results were mixed. Oilseeds performance was strong, the ethanol industry experienced sustained negative margins, and Agricultural Services managed well through a complicated quarter, challenged by the drought. …
As we look ahead to 2013, we are bringing online our large Paraguay soybean processing plant as South American farmers are responding to market conditions with record plantings, and we are implementing plans to navigate the tight U.S. crop supply.
Longer-term, we remain optimistic as we see continued growth in global demand for protein meal and other agricultural products.

The company’s oilseeds division revenues and profits rose, but operating profits were down in the corn processing division as ethanol sold for less than the stuff costs to make. Excluding a one-time charge of $146 million for the planned divestment of the company’s Gruma investment, the agricultural services fell by $99 million compared with the same period a year ago.

Sales in the company’s oilseeds group rose 6.8%, compared with the first fiscal quarter of 2012, but corn processing revenues were down 5% and ag services revenues were down 5.8%.

ADM’s performance was telegraphed by the drop in the consensus EPS estimates over the past 90 days. Three months ago the EPS estimate was $0.66, and the estimate fell further, from $0.43 to a final $0.35. That’s pulling the target closer by nearly half. Beating that is nothing to cheer over.

The company’s shares closed at $27.05 last Friday, in a 52-week range of $25.02 to $33.98. Equity markets are closed in the U.S. again today because of Hurricane Sandy. The consensus target price for the shares was around $28.60 before today’s report.

Paul Ausick