Citigroup: Oil's Rebound To Boost Archer Daniels Midland

Archer Daniels Midland Company ADM will indirectly gain from a 30 percent increase in oil prices expected in 2015, an analyst said Tuesday.

Cheap oil has depressed the commodities processor's ethanol and biodiesel fuels business, according to Citigroup's David Driscoll.

But Citigroup expects prices for West Texas crude will rebound next year to $72 a barrel, from a current level around $55.

Driscoll boosted his price target on the company 20 percent to $57 a share.

The company's share price has faltered slightly in recent months and traded Tuesday at $50.04, up 0.42 percent.

Noting Archer's 15 percent year-to-date gain, Driscoll said prospects for a similar, future gain "carries more risk, given the recent slide in petroleum prices."

But Driscoll nonetheless maintained a Buy rating on Archer, citing in part the company's recent "record margins" in its soybean crushing business and the divesture, announced Monday, of its under-performing cocoa business to Olam International Ltd. for $1.3 billion.

Archer also agreed in September to sell its chocolate business to privately held Cargill Inc. for $440 million.

Driscoll figures Archer took a bath on both deals, calculating that the combined cocoa and chocolate assets were worth $3 billion.

But the assets' returns were barely above breakeven, according to Driscoll, who expects Archer will use proceeds to reduce debt.