Why Archer-Daniels-Midland Stock Gained Today

Archer-Daniels-Midland (ADM 3.93%) published its fourth-quarter earnings results before the market opened Tuesday, and investors sent the stock higher. The agricultural commodities company’s share price closed out the session up by 3.9%, according to data from S&P Global Market Intelligence.

ADM’s stock gained ground despite the fact that its Q4 performance missed expectations. It posted non-GAAP (adjusted) earnings of $1.36 per share on revenue of $22.98 billion. The analysts’ average estimates had called for the business to post earnings of $1.43 per share on revenue of roughly $23.99 billion.

ADM’s Q4 and accounting issues weren’t as bad as some feared

Archer-Daniels-Midland’s revenue fell roughly 11% year over year in Q4, while adjusted earnings per share fell roughly 30%.

Though that fourth-quarter performance wasn’t terribly exciting, the company did have some good news for shareholders. Management announced that the company’s board of directors had authorized up to $2 billion in additional stock buybacks. Archer-Daniels-Midland said that it plans to purchase roughly $1 billion worth of shares rapidly, which suggests the company believes its stock is currently undervalued.

The stock had been up as much as 6.5% earlier in Tuesday’s trading, but lost some ground on news that the Justice Department had issued subpoenas to some employees in an investigation into accounting practices in the company’s nutrition unit. ADM said that it is taking steps to improve accounting between its segments, and that it’s continuing to cooperate with Justice and the Securities and Exchange Commission on the matter.

What comes next for ADM?

For 2024, the company is guiding for earnings to come in between $5.25 per share and $6.25 per share. The midpoint of that guidance range would amount to a decline of roughly 18% from the adjusted earnings of $6.98 per share that it posted in 2023. But while ADM expects higher operating costs to lead to weaker margins, it does expect stronger sales volumes this year.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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