ADM shares upgraded to buy with higher price target of $67

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On Tuesday, CFRA raised its rating on Archer Daniels Midland Company (NYSE:) from Hold to Buy, also increasing the share price target to $67 from the previous $61. The new target is based on a 10.9 times multiple of the adjusted earnings per share (EPS) for 2024, which CFRA estimates at $6.13, up from the earlier forecast of $6.10. The firm expects the adjusted EPS for 2025 to be $6.34.

Archer Daniels Midland reported a decrease in fourth-quarter adjusted EPS to $1.36, which is a 30% drop year-over-year, missing estimates by $0.07. The company’s adjusted total segment earnings before interest and taxes (EBIT) also declined by 16% year-over-year to $1,399 million.

Despite the lower figures, the company has set its EPS target for 2024 between $5.25 and $6.25, which, at the midpoint, represents an 18% decrease year-over-year. This anticipated decline is attributed to the normalization of macro conditions after several years of high crop prices and supply chain disruptions.

The firm noted that the Nutrition segment’s operating profits are expected to return to growth following a 36% year-over-year decline in 2023, with profits totaling $427 million. CFRA believes that 2024 will likely be the lowest point for earnings, but remains confident in the company’s ability to meet its 2025 targets, which were established back in 2021.

CFRA’s confidence in the stock is further bolstered by the resolution of an intersegment accounting issue, which was deemed less concerning than previously anticipated. This is expected to alleviate a significant concern for investors.

Moreover, Archer Daniels Midland has announced a shift in its capital allocation strategy towards enhancing shareholder returns. The company revealed a new $2 billion share buyback program, with plans to execute $1 billion of this as promptly as possible.

The upgrade to a Buy rating reflects the analyst’s positive outlook on the company’s future performance and its commitment to shareholder value, despite the short-term challenges it currently faces.

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