ARCHER DANIELS MIDLAND CO. $36 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 596.7 million; Market cap: $21.5 billion; Price-to-sales ratio: 0.3; Dividend yield: 3.1%; TSINetwork Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, canola, flax seed, peanuts and other crops into 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.
In the three months ended September 30, 2015, Archer’s earnings fell 66.3%, to $252 million from $747 million a year earlier. It spent $1.8 billion on share buybacks in the first nine months of 2015, so per-share profits declined 64.0%, to $0.41 from $1.14, on fewer shares outstanding.
Without unusual items, mainly gains on asset sales, earnings per share fell 30.2%, to $0.60 from $0.86. Revenue declined 8.6%, to $16.6 billion from $18.1 billion. International markets supply half of the company’s revenue, so the high U.S. dollar hurts the contribution from its overseas operations. Record crop harvests have also depressed prices and profits at its grain-trading business.
Meantime, lower gasoline prices and record U.S. production have cut ethanol prices and profit margins. In late 2014, Archer paid $3.1 billion for Switzerland- based ingredient supplier WILD Flavors. In the latest quarter, this business contributed $593 million to the company’s total revenue.
Archer ended the quarter with cash of $1.1 billion, or $1.89 a share. Its long-term debt of $5.8 billion is a moderate 27% of its market cap.
The company’s earnings will likely fall 8.2% in 2015, to $3.15 a share. However, they could rise to $3.50 in 2016, and the stock trades at just 10.3 times that forecast. The $1.12 dividend yields 3.1%.
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