Archer-Daniels Midland Stock Holds Strong: Is It Time to Invest?

Archer-Daniels Midland Company NYSE:ADM shares rose more than 8% after the company reported fourth-quarter and full-year 2023 earnings on March 12. The company missed both earnings and profits, but that wasn’t the big news. Investors are relieved after receiving information about the accounting investigation announced by the company in January 2024.

ADM is one of the leading agricultural stocks among consumer staples stocks. The company’s products are essential in the production of consumer goods, including food, beverages, animal feed and industrial products.

An update on the accounting probe… Sort of

Analysts and investors were waiting to hear any updates from the company regarding the accounting probe announced by the company after suspending its chief financial officer (CFO), Vikram Luthar, in January 2024. At that time, the company had cut its outlook on profits pending an external decision. recommend investigation of accounting practices involving its nutrition segment.

There was little the company could say since this became a Department of Justice (DOJ) investigation based on an SEC investigation. However, during the call, Chairman, CEO and President, Juan Ricardo Luciano, noted, “In connection with our internal investigation, we have corrected certain intersegment sales that occurred between our Nutrition reporting segment and our Agricultural Services reporting segments and Oilseeds and carbohydrate solutions that have not been recorded at amounts approaching market rates.”

Luciano further explained that these adjustments were not material to the company’s consolidated financial statements taken as a whole for any period.

That appeared to be enough for some investors as the stock is far from the 52-week low it hit in late January.

The company’s business is slowing down

With some clarity on the accounting scandal, investors can focus on the company’s business performance. For full-year 2023, Archer-Daniels Midland reported earnings per share (EPS) of $6.98, a loss of approximately 9% compared to 2022.

Additionally, the company expects lower full-year earnings in 2024, ranging from $5.25 to $6.25. What may give analysts pause is the range of guidance, which suggests the company is trying to target a broad range of outcomes.

The king keeps his crown

Archer-Daniels Midland is part of an exclusive club of companies called Dividend Kings. All of these companies have increased dividends for at least 50 consecutive years. For ADM, that number is 52 and counting.

The dividend yield is currently 3.32% and shareholders receive $2 per share per year. And with a payout percentage of 31.25%, there is no fear that this king will lose his audience anytime soon.

Analysts have a mixed picture of ADM stock

Archer-Daniels Midland analyst ratings on MarketBeat have a Reduced rating on ADM stock. But since they are likely digesting the update on the accounting investigation, analysts may be waiting to weigh in on the latest report. One exception is Stifel Nicolaus, who assigned a Hold rating on March 14, 2024, with a price target of $58. Barclays also confirmed its Sell rating.

Such ratings could impact traders who may not be enthusiastic about the stock until the accounting investigation is fully resolved. But for long-term investors, Archer-Daniels Midland is still delivering the goods: stock buybacks, a safe dividend, and a stable market and moat for its products.

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