Archer-Daniels-Midland Company (NYSE:ADM) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat expectations with revenues of US$64b arriving 2.3% ahead of forecasts. Statutory earnings per share (EPS) were US$3.15, 4.0% ahead of estimates. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
See our latest analysis for Archer-Daniels-Midland
Taking into account the latest results, Archer-Daniels-Midland’s nine analysts currently expect revenues in 2021 to be US$64.7b, approximately in line with the last 12 months. Per-share earnings are expected to expand 13% to US$3.57. Before this earnings report, the analysts had been forecasting revenues of US$64.8b and earnings per share (EPS) of US$3.57 in 2021. The consensus analysts don’t seem to have seen anything in these results that would have changed their view on the business, given there’s been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$55.71. The consensus price target is just an average of individual analyst targets, so – it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Archer-Daniels-Midland at US$61.00 per share, while the most bearish prices it at US$46.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Archer-Daniels-Midland is an easy business to forecast or the the analysts are all using similar assumptions.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It’s clear from the latest estimates that Archer-Daniels-Midland’s rate of growth is expected to accelerate meaningfully, with the forecast 0.5% revenue growth noticeably faster than its historical growth of 0.1%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 3.2% next year. So it’s clear that despite the acceleration in growth, Archer-Daniels-Midland is expected to grow meaningfully slower than the industry average.
The Bottom Line
The most important thing to take away is that there’s been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations – although our data does suggest that Archer-Daniels-Midland’s revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$55.71, with the latest estimates not enough to have an impact on their price targets.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year’s earnings. We have forecasts for Archer-Daniels-Midland going out to 2023, and you can see them free on our platform here.
That said, it’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Archer-Daniels-Midland (at least 1 which is concerning) , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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