Archer Daniels Midland Company ADM is slated to report first-quarter 2015 results on May 5, before the opening bell. In the last quarter, the company had delivered a negative surprise of 7.5%. Let’s see how things are shaping up for this announcement.
Factors Influencing This Quarter
Archer Daniels’ earnings in the previous quarter benefited from strong ethanol demand, due to reduced gasoline prices, as well as its cost containment measures as the increase came despite a fall in revenue. This reinforces our confidence in the company’s cost containment efforts and cash flow generating capacity. Further, we believe that the company's constant focus on enhancing its processing capabilities and global footprint through strategic acquisitions and joint ventures bode well for its growth. However, the risk associated with operating internationally, including unfavorable currency translations, remains a concern. Hence, we are cautiously optimistic about Archer-Daniels' performance in this quarter.
Earnings Whispers
Our proven model does not conclusively show that Archer Daniels is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Archer Daniels is currently pegged at -4.17%. This is because the Most Accurate estimate of 69 cents stands below the Zacks Consensus Estimate of 72 cents.
Zacks Rank: Archer Daniels’ Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
American Eagle Outfitters Inc. AEO has an Earnings ESP of +18.18% and a Zacks Rank #1 (Strong Buy).
Best Buy Co. Inc. BBY has an Earnings ESP of +3.45% and a Zacks Rank #3.
The Home Depot Inc. HD has an Earnings ESP of +2.61% and a Zacks Rank #3.
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