Market Overview

Goldman Sachs Joins The Growing Archer Daniels Bull Crowd

Goldman Sachs Joins The Growing Archer Daniels Bull Crowd
Related ADM
10 Stocks To Watch For November 6, 2018
Earnings Scheduled For November 6, 2018
Associated British Foods A Cautious Buy (Seeking Alpha)

Citi upgraded Archer Daniels Midland Co (NYSE: ADM)'s stock last week, and the processor of agricultural commodities earned another upgrade Sunday courtesy of Goldman Sachs. 

The Analyst

Goldman Sachs' Adam Samuelson upgraded Archer Daniels' stock rating from Neutral to Buy with a price target boosted from $39 to $50.

The Thesis

A bullish stance on Archer Daniels' stock mostly comes from increased confidence in the company's profitability outlook for 2018 and beyond, Samuelson said in the upgrade note. (See the analyst's track record here.) 

Consensus estimates are "underappreciating" Archer Daniels' earnings growth from a combination of the following factors, Samuelson said:

  • A healthy oilseeds environment.
  • Improved results in the Ag Services segment. 
  • A more favorable ethanol and corn processing environment in the U.S.
  • Benefits from internal initiatives like cost cutting and inorganic corporate actions.

"We believe investors remain cautious due to several consecutive years of negative estimate revisions, and that as fundamentals continue to strengthen, we believe the stock will outperform as we begin to see the first cycle of positive estimate revisions in several years," Samuelson said. 

Goldman's revised $50 price target is based on an equal blend of 16.5x (up from 14.5x) 2018E P/E and 9.75x (up from 9x) 2018E EV/EBITDA. The higher multiples are justified due to expectations of stronger growth in 2018 and beyond and a premium to some of rivals due a larger proportion of earnings coming from "more stable and value-added" businesses, the analyst said. 

Price Action

Shares of Archer Daniels were trading higher by 2.77 percent at the time of publication Monday morning. 

Related Links:

A Soy Story: Citi Upgrades Grain Processors Archer Daniels, Bunge

3 Market Winners From A Bipartisan Farm Bill In 2018

Photo courtesy of Archer Daniels Midland. 

Latest Ratings for ADM

Nov 2018ArgusUpgradesHoldBuy
Aug 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Aug 2018BMO CapitalMaintainsMarket PerformMarket Perform

View More Analyst Ratings for ADM
View the Latest Analyst Ratings

Posted-In: Adam Samuelson agricultureAnalyst Color Upgrades Price Target Commodities Markets Analyst Ratings Best of Benzinga


Related Articles (ADM)

View Comments and Join the Discussion!

Latest Ratings

AMTDMorgan StanleyUpgrades65.0
APOMorgan StanleyDowngrades34.0
CGMorgan StanleyDowngrades23.0
EIXEdward JonesDowngrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

6 Companies That Benefit From The Growing Smart Speaker Market

SwipeSum Forces Payments Providers To Compete For Business