The Archer Daniels Midland Company (ADM) has a key part in solving some of the world's toughest problems. They are the world's leading agricultural processor and they are pivotal to meeting the world's needs for food and fuel.
As the world's population increases exponentially, the demand for nutritional foods for people, feed ingredients for livestock, alternative fuels for energy, and environmentally friendly alternatives to traditional chemicals we use every day continues also increases exponentially. And ADM is the company that'll meet those needs in the years ahead.
The business of Archer Daniels Midland Company (ADM) is turning farm crops into food and fuel on a massive scale. They produce the food ingredients, animal feeds and feed ingredients, biofuels and other products that manufacturers around the world use to provide wholesome food and a better life to billions of people. In the process they turn farm crops such as corn, oilseeds, wheat, and cocoa into ingredients that make manufactured foods taste great. In fact most of the things we eat every day include ingredients developed by ADM.
In addition, they also process crops to produce those clean, renewable bio-fuels and they are working toward developing the next-generation petroleum alternatives. These are two areas that are in constant demand and whose demand will only grow greater as the world's population grows.
The video below shows just how ADM in integrated into our everyday lives and how modern day supermarkets simply wouldn't exist without a company exactly like ADM.
As the world's population increases exponentially, the demand for nutritional foods for people, feed ingredients for livestock, alternative fuels for energy, and environmentally friendly alternatives to traditional chemicals we use every day continues also increases exponentially. And ADM is the company that'll meet those needs in the years ahead.
The business of Archer Daniels Midland Company (ADM) is turning farm crops into food and fuel on a massive scale. They produce the food ingredients, animal feeds and feed ingredients, biofuels and other products that manufacturers around the world use to provide wholesome food and a better life to billions of people. In the process they turn farm crops such as corn, oilseeds, wheat, and cocoa into ingredients that make manufactured foods taste great. In fact most of the things we eat every day include ingredients developed by ADM.
In addition, they also process crops to produce those clean, renewable bio-fuels and they are working toward developing the next-generation petroleum alternatives. These are two areas that are in constant demand and whose demand will only grow greater as the world's population grows.
The video below shows just how ADM in integrated into our everyday lives and how modern day supermarkets simply wouldn't exist without a company exactly like ADM.
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The Company
| Archer-Daniels-Midland Company (ADM) procures, transports, stores, processes, and merchandises agricultural commodities and products. The company’s Oilseeds Processing segment originates, merchandises, crushes, and processes soybeans and soft seeds into vegetable oils and protein meals. Its products include ingredients for the food, feed, energy, and industrial products industries; crude vegetable and salad oils; margarine, shortening, and other food products; refined oils; oilseed protein meals; cottonseed flour; and cotton cellulose pulp. This segment also blends fertilizers; procures and processes cocoa beans into cocoa liquor, cocoa butter, cocoa powder, chocolate, and various compounds; and supplies peanuts and peanut-derived ingredients, and agricultural commodity raw materials. In addition, it is involved in the oil palm cultivation, sugar milling and refining, biodiesel manufacturing, and grains processing activities; and provision of specialty fats and oleo chemicals. Its Corn Processing segment converts corn into sweeteners, starches, and bio products. This segment’s products comprise syrup, glucose, and dextrose; alcohol, amino acids, and other specialty food and animal feed ingredients; ethyl alcohol; corn gluten feed and meals, and distillers’ grains; citric and lactic acids, lactates, sorbitol, xanthan gum, and glycols; propylene and ethylene glycol; and sugarcane ethanol, as well as fresh and dry yeast. The company’s Agricultural Services segment buys, stores, cleans, and transports oilseeds, corn, wheat, milo, oats, rice, and barley; and resells those commodities as food and feed ingredients. It is also involved in merchandising agricultural commodities and processed products; processing wheat into wheat flour; and processing and distributing formula feeds, animal health and nutrition products, and edible beans. The company is also engaged in futures commission merchant activities. The company was founded in 1898 and is headquartered in Chicago, Illinois. (Daily Chart) (Weekly Chart) | 2 November Price $47.00 1yr Target $52.92 Analysts 12 1yr Cap Gain 12.59% Dividend $0.96 Yield 2.04% 1yr EST Tot Return 14.63% Market Cap $30.34 Bil Beta 0.82 EPS (ttm) $2.49 Payout Ratio 38.55% EPS next yr $3.51 P/E 18.88 PEG 4.72 Forward P/E 13.38 Debt/Equity 0.28 ROA 4.00% ROE 8.30% ROI 4.40% Sales $87.73 Bil Income $1.65 Bil Profit Margin 1.88%  |
The Fundamentals
A review of the fundamentals is provided below. A quick review of the data below shows a fairly consistent rate of growth in revenues and dividends with a more volatile showing in their earnings. While the earnings are a red flag for me, I believe that ADM has good management and as long as revenues continue to increase, the company will be able to manage their earnings through this difficult period. I think their ability to continue to increase their dividends despite the volatility in earnings show that management has knowledge that this is temporary. In fact future estimates confirm this.
| Year 2015 Est 2014 Est 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 | Revenues $89.36 Bil $88.20 Bil $89.80 Bil $89.03 Bil $80.67 Bil $61.68 Bil $69.20 Bil $69.81 Bil $44.01 Bil $36.59 Bil $35.94 Bil $36.15 Bil $30.70 Bil | Earnings $3.51 $3.00 $2.02 $1.84 $3.13 $3.00 $2.65 $2.79 $3.30 $2.00 $1.59 $0.76 $0.70 | Dividends $1.20 $0.96 $0.76 $0.70 $0.65 $0.60 $0.56 $0.52 $0.46 $0.40 $0.34 $0.30 $0.24 | Payout Ratio 34.18% 32.00% 37.62% 38.04% 20.76% 20.0% 21.13% 18.99% 13.93% 20.0% 21.38% 39.47% 34.28% |
| Revenue Growth Rate 1 year = 0.86% 2 year = 5.50% 3 year = 13.19% 4 year = 6.73% 5 year = 5.16% 10 year = 11.33% | Earnings Growth Rate 1 year = 9.78% 2 year = -19.67% 3 year = -12.24% 4 year = -6.57% 5 year = -6.26% 10 year = 11.17% | Dividend Growth Rate 1 year = 8.57% 2 year = 8.13% 3 year = 8.11% 4 year = 7.93% 5 year = 7.88% 10 year = 12.21% |
The Technicals
Looking at the charts below, it can be seen that ADM has recently fallen. This fall has occurred along with the fall in the overall market and I think it's been a reaction to the price war in oil that's apparently been going on around the world. This "war" has been a result of the increase supply in North America (due to oil fracking),lower demand for oil based products (especially in Europe), and the continual demand for income by the middle east countries who owe billions to developers and their commitment to a government based on welfare payments to its population.
Since ADM is tied to the oil industry through the production of biofuels and chemical additives used in the production of "clean fuels", traders have sold off the company's shares along with other oil companies shares. Looking at the momentum indicators on the daily chart it's apparent that the selling may have ceased because the RSI and MACD bottomed earlier this month and they are turning up fast along with the stock price. Looking at the monthly chart it can be seen that the price bounced off the lower Bollinger Band and it now heading back up. I believe that the stock's upward push will continue once it gets through this consolidation area. I'm looking for the Bollinger Bands to contract, the stock to level out for a short period, and then move higher. While the one year target is near $53 per share, I don't find it unreasonable to project a price near $60 by the end of 2015.
Since ADM is tied to the oil industry through the production of biofuels and chemical additives used in the production of "clean fuels", traders have sold off the company's shares along with other oil companies shares. Looking at the momentum indicators on the daily chart it's apparent that the selling may have ceased because the RSI and MACD bottomed earlier this month and they are turning up fast along with the stock price. Looking at the monthly chart it can be seen that the price bounced off the lower Bollinger Band and it now heading back up. I believe that the stock's upward push will continue once it gets through this consolidation area. I'm looking for the Bollinger Bands to contract, the stock to level out for a short period, and then move higher. While the one year target is near $53 per share, I don't find it unreasonable to project a price near $60 by the end of 2015.
 Daily Chart |  Weekly Chart |
The Competition
Archer Daniels Midland Company is part of the Farm Products Industry which is part of the Consumer Goods Sector of the economy. Below are a few of the major corporations included in this industry. They each pay at least a minimal dividend and they are listed in the order of their market capitalization.
Conclusion
I think this company has a great future. Demographics alone will propel this company forward as the need for its products continue to expand. I have recently begun accumulating a position in this stock and I will continue to add to that position over an extended period of time. I think this company has the wind in its back and the numbers on its side.
I will also continue to monitor its revenues and earnings for volatility but the consistent rate of dividend growth and the low payout ratio should allow the company to increase dividends for years to come. ADM, with 39 years of continuous dividend increases, should be able to easily transition from the list of Dividend Aristocrats to the list of Dividend Kings.
I will also continue to monitor its revenues and earnings for volatility but the consistent rate of dividend growth and the low payout ratio should allow the company to increase dividends for years to come. ADM, with 39 years of continuous dividend increases, should be able to easily transition from the list of Dividend Aristocrats to the list of Dividend Kings.
Live Interactive Chart
Additional Information about the Archer Daniels Midland Company.
| ADM and Food Brochure 
| ADM and BioFuels Brochure
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