Morgan Stanley Fears Expectations on Archer Daniels Midland Company May Be Too High

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In a report published Wednesday, Morgan Stanley analyst Vincent Andrews reiterated an Equal-Weight rating on
Archer Daniels Midland CompanyADM
. In the report, Morgan Stanley noted, “We believe improved crop dynamics are reflected in ADM's current valuation with an expectation for significant improvement in both EPS and ROIC. While we anticipate material improvement, we see risk that the equity market's expectations are too high. Overcapacity in ethanol will offset the benefit of lower corn prices as production will come back online anytime margins turn positive. ADM's more recent willingness to be a swing producer should moderate some of the margin volatility. Lower Mexican sugar prices and a potential Mexican CSD tax create headwinds, though lower US corn prices make US HFCS more competitive as well. ADM's long-term demand growth story remains intact. We also believe management is now more risk-reward focused from a return perspective, and investors will be happier with capital allocation.” Archer Daniels Midland Company closed on Tuesday at $38.23.
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Posted In: Analyst ColorReiterationAnalyst RatingsMorgan StanleyVincent Andrews
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