Archer-Daniels-Midland's Financial Figures 'Are Too High,' Analyst Downgrades Stock

Sunday, Archer-Daniels-Midland Company ADM placed its CFO Vikram Luthar on leave due to an investigation studying accounting practices and procedures related to its nutrition segment.

Also, the company has appointed Ismael Roig as its interim Chief Financial Officer. It updated its FY23 outlook with adjusted EPS of above $6.90 vs. consensus of $7.28.

Archer-Daniels-Midland expects to report fourth quarter and FY23 operating profit for its AS&O and Carbohydrate Solutions reporting segments in line with previous indications provided in the third quarter 2023 earnings call. 

Due to the ongoing investigation, the company has withdrawn its outlook for the nutrition segment. 

Also Read: ADM Enhances Flavor Power: Acquires Revela Foods To Spice Up Global Portfolio.

The company also delayed its earnings release and conference call relating to the fourth quarter and full year 2023 financial results until the investigation is over.

Baird has downgraded Archer-Daniels-Midland, emphasizing that the current financial figures are excessively optimistic. 

The analyst suggests that these elevated numbers could burden the stock, posing at least a looming challenge and potentially leading to downside risks.

The analyst downgraded the stock from Outperform to Neutral, with a price target of $61, down from the prior target of $96.

This price target is derived from a valuation of approximately 10 times estimated earnings per share for 2024, considering the varying demand conditions, ongoing investigation, and long-term growth factors. 

Similar companies in the large grain processing sector are trading at earnings multiples ranging from approximately 10 to 16 times their estimated EPS for 2024.

Read Next: Archer-Daniels-Midland Q3: Sales Miss, Bottomline Beat, Lower Ag Services Results & More.

Price Action: ADM shares are down 23.40% at $52.22 on the last check Monday.

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