It's been a good week for Archer-Daniels-Midland Company (NYSE:ADM) shareholders, because the company has just released its latest quarterly results, and the shares gained 3.2% to US$37.14. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at US$15b, statutory earnings beat expectations by a notable 28%, coming in at US$0.69 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from Archer-Daniels-Midland's ten analysts is for revenues of US$65.8b in 2020, which would reflect a credible 2.3% increase on its sales over the past 12 months. Statutory earnings per share are predicted to rise 9.8% to US$3.00. In the lead-up to this report, the analysts had been modelling revenues of US$66.1b and earnings per share (EPS) of US$3.07 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
The consensus price target held steady at US$45.45, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Archer-Daniels-Midland, with the most bullish analyst valuing it at US$52.00 and the most bearish at US$40.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Archer-Daniels-Midland's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow 2.3%, well above its historical decline of 2.4% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 2.0% per year. So while Archer-Daniels-Midland's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Archer-Daniels-Midland. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target held steady at US$45.45, 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 estimates - from multiple Archer-Daniels-Midland analysts - going out to 2023, and you can see them free on our platform here.
Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Archer-Daniels-Midland (2 are a bit unpleasant) you should be aware of.
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