Shares of Archer-Daniels-Midland (NYSE: ADM) were heading lower today after the agricultural company missed top-line estimates in its first-quarter earnings report. It did beat profit expectations, but earnings still fell.
As a result, the stock was down 3.3% as of 11:05 a.m. ET on Tuesday.
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Falling prices weigh on results
As a grain processor and trader, ADM is sensitive to commodity prices, and falling prices due to an increase in supply have weighed on results. In the first quarter, revenue fell 9.3% to $21.8 billion, which was below estimates at $22.3 billion.
Not surprisingly, the decline in revenue pushed profits lower as adjusted segment operating profit fell 24% to $1.31 billion, and adjusted earnings per share (EPS) declined from $2.09 to $1.46, though that topped the analyst consensus at $1.36.
CEO Juan Luciano said, "ADM's solid first-quarter results showcased our team's ability to execute our strategy with agility in the face of anticipated challenging market conditions." The company is also focused on strategic initiatives like its Green Bison joint venture focused on soybean processing to create renewable diesel fuel.
What's next for ADM
The agricultural company maintained its earnings guidance for the year, calling for adjusted EPS of $5.25 to $6.25, which compares favorably with the analyst consensus at $5.57.
Price fluctuations are outside of its control, but investors could reward the company for its investments in green energy down the road. And the stock looks cheap, trading at forward price-to-earnings ratio around 10, given that ADM looks like a good bet to recover from the current weakness in the industry.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
