Goldman Sachs lowers ADM shares target amid macro challenges
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On Wednesday, Goldman Sachs adjusted its outlook for Archer Daniels Midland Company (NYSE:), a major player in the agricultural industry. The firm’s analyst reduced the price target on the company’s stock to $64 from the previous $67 while retaining a Neutral rating on the shares.
Archer Daniels Midland’s stock demonstrated resilience in the market, outperforming broader indices with a 3.9% increase compared to the ‘s 1.1% gain. This performance followed the release of the company’s fourth-quarter results for 2023 and an initial outlook for 2024 that aligned with expectations. The absence of significant new information concerning the ongoing Nutrition accounting investigation also provided a sense of stability to investors.
The company has issued earnings per share (EPS) guidance for 2024 in the range of $5.25 to $6.25. This projection is slightly lower than the previous estimates of $5.83 by Goldman Sachs and $5.87 by consensus, reflecting a year-over-year decline due to shrinking margins in the current agricultural macro environment.
Goldman Sachs noted that while the lack of substantial new charges and an earnings outlook consistent with prior expectations were positive, there are still concerns. The cyclical conditions in ADM’s core businesses have worsened over the last six months, and the performance of the Nutrition segment remains below the levels expected after a decade of mergers and acquisitions investments.
The ability of ADM to effectively manage the more challenging agricultural macro backdrop, achieve the targeted cost reductions, and improve the performance of the Nutrition segment will be key topics of discussion for investors moving forward. In light of these considerations, Goldman Sachs has revised its EPS estimates for 2024-2025 downward by 5% and 2%, respectively, to reflect more conservative cyclical assumptions, primarily in the Ag Services and Oilseeds (AS&O) segment.
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