Poor weather and harvest yields led to a 32.2% drop in revenue for this company during the most-recent quarter.

However, it’s now considering the spinoff of its ethanol operations, which would let it better focus on its more profitable operations and acquisitions.

The stock trades at just 13.2 times the company’s 2019 earnings forecast.

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ARCHER DANIELS MIDLAND CO., (New York symbol ADM), processes corn, wheat, soybeans, canola, flaxseed, peanuts and other crops to make a variety of food ingredients such as flour, oils and sweeteners. It’s also the largest maker of ethanol from corn in the U.S.

Archer is now considering spinning off or selling its ethanol business. That’s because its profitability has suffered after China hiked import taxes on the biofuel in 2017, and then twice in 2018. As well, China is increasing its domestic capacity, which has hurt demand and prices for U.S. ethanol. Rising corn prices have also squeezed its profit margins.

A spinoff would let the parent company focus on its more-profitable operations, many of them added through acquisitions. For example, in late 2014, Archer paid $3.1 billion for Switzerland- based ingredient supplier Wild Flavors.

Despite that purchase, overall revenue fell 25.1%, from $81.2 billion in 2014 to $60.8 billion in 2017. That’s due to lower selling prices, which vary with the price of the underlying commodity, and sales of smaller businesses. Revenue rebounded in 2018 by 5.8%, to $64.3 billion.

If you exclude writedowns and other unusual items, Archer’s overall earnings fell 39.7%, from $2.17 billion in 2014 to $1.28 billion in 2016. Due to fewer shares outstanding, earnings per share declined at a slower pace of 33.1%, from $3.23 to $2.16. Earnings turned around in 2017, rising 12.5% to $2.43 a share (or a total of $1.39 billion). Earnings jumped a further 44.0%, to $3.50 a share (or a total of $1.98 billion) in 2018.

Growth Stocks: Cold and flooding cut earnings 32.2%

In the three months ended March 31, 2019, Archer’s revenue fell 1.4%, to $15.30 billion from $15.53 billion, a year earlier. Revenues were lower in all of its business segments, except for nutrition, which had a 34.9% increase in revenue during the quarter. Excluding one-time items, the company made $261.0 million, or $0.46 a share, in the latest quarter. That’s down 32.2% from $385.0 million, or $0.68 a share.

The declines reflect severe cold and massive flooding, which hurts revenue and profits by disrupting rail traffic. As well, unfavourable river conditions limited the company’s ability to transport grains and other products by barge.

Archer ended the quarter with cash of $5.2 billion, and its long-term debt of $7.7 billion is a manageable 27% of its market cap.

The company also continues to cut its costs under a multi-year restructuring plan, including job cuts and improving efficiency. The plan will cut $200 million to $250 million from its annual costs by the end of 2019.

Archer will probably earn $3.11 a share in 2019, and the stock trades at just 12.0 times that estimate. With the March 2019 payment, the company raised its quarterly dividend by 4.5%. Investors now receive $0.35 a share instead of $0.335. The new annual rate of $1.40 yields 3.8%.

Recommendation in Wall Street Stock Forecaster: Archer Daniels Midland is a buy.