Archer Daniels Company ADM has been gaining from solid demand, improved productivity, product innovations and persistent growth in the Nutrition segment. We are positive about the company’s prospects and believe that the time is right for you to add the stock to your portfolio, as it looks promising and is poised to carry the momentum ahead.
We note that ADM shares have gained 28.2% over the past year, outperforming its industry’s growth of 6.6%. Archer Daniels currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of B.
Over the past month, the Zacks Consensus Estimate for Archer Daniels for 2022 has increased 3.3%. The consensus mark for 2022 sales and earnings for Archer Daniels suggests year-over-year increases of 12.3% and 22%, respectively. Moreover, it boasts a long-term earnings growth of 6.4%. The favorable estimate revisions instill investor confidence in the stock.
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Let's see what makes this agricultural stock an intriguing investment option at the moment.
Strength in Nutrition Unit
Archer Daniels has been gaining from the robust performance in its Nutrition segment. In first-quarter 2022, revenues in the segment rose 23.1% year over year. The segment’s adjusted operating profit grew 23% year over year, owing to significant gains in the Human and Animal Nutrition units. The Human Nutrition unit gained from strength across all businesses.
Despite rising costs, continued momentum in Flavors bodes well. Strength in alternative proteins, including gains from the Sojaprotein buyout, and favorable currency timing impacts in South America, aided the Specialty Ingredients category. The Health & Wellness unit also witnessed robust quarterly growth, driven by growth in probiotics, gains from its Deerland Probiotics buyout and solid fiber demand.
The animal nutrition unit grew significantly year over year, driven by strength in amino acids stemming from positive changes in the product mix and sturdy demand in North America, which partly offset the global supply-chain disruptions. Backed by strength across both Human and Animal Nutrition units, the nutrition segment expects 20% operating profit growth for 2022, up from the earlier mentioned 15% rise. It also expects the nutrition segment to grow significantly higher year over year in the second quarter.
In response to the growing trends for all things sustainable, Archer Daniels has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is a plant-based product. Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets.
Such endeavors are likely to help attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low carbon sustainable aviation fuel. It also shut down its ethanol facility in Peoria last October. The company is also utilizing innovative technologies to develop products and boost operating capabilities.
Archer Daniels is on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As a part of readiness efforts, the company introduced a company-wide simplification initiative. Its strategic pillars for growth, as well as the aforementioned new initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
Driven by the above-mentioned factors, Archer Daniels delivered first-quarter 2022 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. This marked the 10th straight quarter of adjusted operating profit growth. Revenues advanced 25.2% year over year, driven by solid sales across the majority of the segments. Adjusted earnings of $1.90 per share grew 36.7% year over year, while earnings on a reported basis, were up 52.5% year over year.
Stocks to Consider
We highlighted some other top-ranked stocks from the broader Consumer Staples space, namely Campbell Soup CPB, Hershey HSY and Sysco Corporation SYY.
Campbell Soup, the manufacturer and marketer of high-quality, branded convenience food products, currently has a Zacks Rank #2 (Buy). It has an expected long-term earnings growth rate of 1.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Campbell Soup’s current financial-year sales and earnings per share suggests growth of 10.1% and 15.4%, respectively, from the year-ago reported numbers. CPB has a trailing two-quarter earnings surprise of 10.8%, on average.
Hershey, the largest chocolate manufacturer in North America, currently has a Zacks Rank #2. HSY has a trailing two-quarter earnings surprise of 7.9%, on average. It has an expected long-term earnings growth rate of 7.7%.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 11.1% and 11.8%, respectively, from the year-ago reported numbers.
Sysco, the marketer and distributor of food and related products, currently has a Zacks Rank #2. SYY has a trailing two-quarter earnings surprise of 93.75%, on average. It has an expected long-term earnings growth rate of 11%.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and earnings per share suggests growth of 35.9% and 145.5%, respectively, from the year-ago reported numbers. The company has a trailing four-quarter earnings surprise of 3.7%, on average.
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