Why Archer-Daniels-Midland stock is down today
Falling agricultural prices hurt the performance of agricultural companies.
stock Archer-Daniels-Midland (ADM -3.15%) The agricultural company is heading lower today after missing key estimates in its first-quarter earnings report. Although it beat profit expectations, profits were still down.
As a result, the stock was down 3.3% as of 11:05 a.m. ET on Tuesday.
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Falling prices affect results
Grain processor and trader ADM is sensitive to commodity prices, and lower prices due to increased supply weighed on its results. First-quarter sales fell 9.3% to $21.8 billion, below expectations of $22.3 billion.
Unsurprisingly, the decline in sales dragged down profits, with adjusted operating income down 24% to $1.31 billion and adjusted earnings per share (EPS) down from $2.09 to $1.46, but still above the analyst consensus of $1.36.
“ADM’s solid first quarter performance demonstrated our team’s ability to execute our strategy with agility in the face of anticipated challenging market conditions,” said CEO Juan Luciano. The company is also focused on strategic initiatives such as its Green Bison joint venture, which focuses on processing soybeans to make renewable diesel fuel.
Next steps for ADM
The agricultural company maintained its earnings guidance for the year, calling for adjusted EPS of $5.25 to $6.25. This compares favorably with the analyst consensus of $5.57.
Although price fluctuations cannot be controlled, investors can reward companies for investing in green energy in the future. And considering that ADM looks like a good bet to recover from the current industry weakness, the stock looks cheap, trading at a forward price-to-earnings ratio of around 10.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
