Deutsche Bank Gives Earnings Preview On Archer-Daniels-Midland

Archer-Daniels-Midland ADM should continue to benefit from current dislocation, though the pace has decelerated. Strong sweetener/starch pricing relative to corn prices and biodiesel mandate clarity bode well for the future. However, a "tight" U.S. corn balance sheet toward the end of the crop year, narrowing ethanol margins, and uncertain soybean meal demand may serve as a partial offset. Deutsche Bank believes longer-term prospects are captured in valuation. Deutsche Bank adjusts F3Q11E EPS to $0.79 from $0.85. $0.03 of the reduction is associated with remarketing of the company's debt and “if converted” method; the remaining $0.03 is due to slightly weaker fundamentals. DB looks for lower results in Crush/Origination on poor U.S. soybean crush margins and utilization. It expect Ag Svcs to be slightly lower than previously forecast. With the seasonal shift to S.A., export activity out of the U.S. has slowed. U.S. soybean processing margins are particularly weak. ADM's capacity expansion + a new plant + lower livestock numbers + competition from DDGs have left the industry in severe overcapacity. Mgmt's outlook here will be key. Deutsche Bank has a $37 PT and Hold rating on ADM ADM closed Tuesday at $35.54