Will Archer Daniels (ADM) Retain Earnings Beat Trend in Q4?

Archer Daniels Midland Company ADM is slated to report fourth-quarter 2018 results on Feb 5.

Notably, the company delivered a positive earnings surprise in each of the trailing four quarters, the average being 26.9%.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 92 cents, which reflects a 12.2% improvement year over year. Estimates have been stable over the past 30 days. Meanwhile, the consensus mark for quarterly revenues stands at $17.1 billion, up 6.4% from the year-ago period.

What You Should Know Prior to 4Q18 Earnings

Archer Daniels has been progressing well with portfolio management initiatives, cost-savings plan and the Readiness program. Moreover, the company has long been enhancing the operational efficiency at its production and supply chain networks to minimize costs. The company is on track with business transformation under its 1ADM program, which is an integral part of Project Readiness.

Notably, the company has progressed well through the first two phases of Readiness and is currently in the implementation phase. This program is expected to help management have a more coordinated approach toward driving business improvement, standardizing functions and enriching consumers’ experience. Further, Archer Daniels plans to allocate resources efficiently on more mature businesses and make prudent investments.

Additionally, the company remains focused on strengthening its business through increased cost savings, which have been aiding Archer Daniels’ results. Backed by improving market conditions, higher global demand, gains from U.S. tax reform, product innovations and Project Readiness, management continues to be optimistic about delivering solid results in the fourth quarter. Going by segments, management expects impressive results at Origination, Oilseeds and Nutrition in 2018.

All the aforementioned factors are likely to provide a boost to the company’s top and bottom line in the to-be-reported quarter.

However, softness in the Carbohydrate Solutions segment due to weaker ethanol business and bio-products results is concerning. For the fourth quarter, management expects the segment’s results to decline year over year. Also, the Decatur plant downtime and soft ethanol margins are expected to hurt the Carbohydrate Solutions results in 2018.

A Glance at the Zacks Model

Our proven model clearly shows that Archer Daniels is likely to beat earnings estimates in the fourth quarter. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Archer Daniels has a Zacks Rank #1 and an Earnings ESP of +2.45%, which makes us pretty confident about an earnings beat.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to beat estimates:

Monster Beverage Corporation MNST has an Earnings ESP of +0.31% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Church & Dwight Co., Inc. CHD has an Earnings ESP of +2.80% and a Zacks Rank #2.

Newell Brands Inc. NWL has an Earnings ESP of +7.41% and a Zacks Rank #3.

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