Archer Daniels Midland Company’s Swoon Continues (ADM)

It has been a very interesting stretch for companies in the commodity space to say the least. The last six months started off on an extremely rough note, but the last few months have been pretty kind to companies in this space. Take Archer-Daniels Midland Company (ADM) as a great example of this trend.

The company, which deals in the agricultural commodity space, is down about 20% in the past six months, though its three month performance has seen a 20% surge. Year-to-date, shares are flat which puts investors in a very precarious position. Will the recent trends for ADM continue or will the longer-term negative trend continue to hold? Well, if investors look to recent earnings estimate revisions they may get an answer though the bulls may not like it.

Archer Daniels Midland in Focus

Recent earnings estimates have all been lower for ADM stock, pushing the earnings contraction story further into the red. ADM is now expected to see EPS decline by about 41.5% this quarter in year-over-year terms, while it is looking at a -5.2% decline for the full year as well. And even more troubling, the latest estimates for ADM stock have been universally lower, giving ADM a negative Earnings ESP. This can be a harbinger of a miss come earnings season, and it isn’t like ADM is a stranger to falling short of expectations at earnings season either.

ADM is actually working on a three quarter streak of misses at earnings season and it now has a four quarter average of -5%. Clearly, ADM has significant difficulty in managing expectations at earnings season, so there shouldn’t be much hope for this company in the near term.

No wonder ADM currently has a Zacks Rank #5 (Strong Sell) and that more pain is expected for this stock in the near term. Add in a ‘D’ Score for Archer-Daniels-Midland’s VGM, and you have a recipe for more pain ahead.

Try These Other Stock Picks

Despite the gloom for ADM shares right now, the agricultural operations industry actually has a decent ranking. In fact, it is currently in the top 50% of all industries we cover. This means that there are plenty of better choices for investors who want to stay in this group including Fresh Del Monte Produce Inc (FDP).

FDP has seen rising earnings estimates as of late and it is currently projected to see EPS growth in excess of 12.8% for the current year. It is not only a Zacks Rank #1 (Strong Buy), but it has a VGM Score of ‘B’ too, making it an excellent choice for investors in the agricultural operations area of the market. So if you are looking to stay in this industry, definitely give FDP a closer look, and especially over the potentially-in-trouble ADM at this time.

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