ADM - Embedded Expectations Analysis - 2019 09 04
Archer-Daniels-Midland Company (ADM:USA) currently trades near historical lows relative to UAFRS-based (Uniform) Assets, with a 0.8x Uniform P/B. At these levels, markets have muted expectations for the firm, and management has concerns about soybean costs, their acquisitions, and slowing demand.Specifically, management is confident their North American Origination business may have higher soybean input costs, and they may be exaggerating the value they gained from combining their origination and oilseeds business. Furthermore, they may be exaggerating the value of their acquisition of the Ziegler Group, and they may lack confidence in their ability to take advantage of future market opportunities. Additionally, management may be concerned about growing demand for alternative proteins, and they may lack confidence in their ability to improve margins in their European business. Finally, they may be concerned about slowing demand in China, and they appear concerned about the sustainability of recent earnings levels in their Ag Services and Oilseeds segment.
Archer Daniels Midland is a human and animal nutrition and an agricultural origination and processing company. The company has three segments: Ag Services and Oilseeds, which includes activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, and the crushing and further processing of oilseeds such as soybeans and soft seeds into vegetable oils and protein meals; Carbohydrate Solutions, which is engaged in corn and wheat wet and dry milling and other activities; and Nutrition, which engages in the manufacturing, sale, and distribution of an array of products including plant-based proteins, natural flavor ingredients, and flavor systems.
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