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UBS Downgrades Archer Daniels Midland (ADM) to Neutral, 'Lower Growth and Margins'

January 26, 2024 4:11 AM EST
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Price: $60.97 -2.56%

Rating Summary:
    12 Buy, 17 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 11 | New: 26
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(Updated - January 26, 2024 4:36 AM EST)

UBS analyst Manav Gupta downgraded Archer Daniels Midland (NYSE: ADM) from Buy to Neutral with a price target of $51.00 (from $104.00).

The analyst comments "We are downgrading to Neutral with Price Target of $51/shr (no upside). We see downside to street earnings driven by 1) No growth in Nutrition segment; 2) Soy crush driving Yoy Decline in Crush earnings, 3) Weaker RPO earnings due to refined soybean oil premium shrinking and 4) weaker carbohydrate solutions earnings driven by weakness in ethanol margins. In our note on Dec 20, 2023, we had highlighted risk to 2024 earnings driven by weaker crush spreads, falling ethanol margins and lower RPO earnings. In our note on Jan 5, 2024, we had highlighted why ADM earnings would likely face pressure in 2024 / 2025 due to weaker soy crush spread given capacity growth and weaker demand for soybean oil and soybean meal. We see downtime at Decatur as a headwind for earnings in 1H 24. We are 7% below Street for 2024 and 16% below the Street for 2025. Even on our lowered numbers, we have ADM generating $1.3Bn post dividend FCF in both 2024 and 2025, which support strong buybacks. A key reason we are not Sell Rated on this name."

For an analyst ratings summary and ratings history on Archer Daniels Midland click here. For more ratings news on Archer Daniels Midland click here.

Shares of Archer Daniels Midland closed at $51.38 yesterday.


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