This article is written exclusively for Investing.com
ADM studies above $70 per share
Impressive earnings and an attractive dividend
Feeding the world in an inflationary environment
Biofuels add extra dimension to ADM
This multinational company is a core holding company
Agricultural commodities feed more than 7.872 billion people in the world. As countries tackle climate change, agricultural products are increasingly becoming an alternative and renewable energy source.
As farmers around the world grow crops every year to meet our planet's ever-growing demand for food and energy, four companies dominate crop processing, maintenance and many agricultural sectors. Known as the ABCD companies, these companies include: Archer Daniels Midland
Bunge Limited
Cargill (private)
Louis Dreyfus (private person)
In 2020 and 2021, the three main grain and oilseed markets posted impressive gains. rose 39.48% in 2020 and added another 1.03% in 2021. Moved 24.82% in 2020 and 22.57% in 2021. Soft red winter wheat CBOT futures rose 10.81% higher in 2020 and 20 .34% higher in 2021. Inflationary pressures have pushed up input prices, with fertilizer, energy, labor, transport and land values ??rising. Prices of agricultural products have risen due to rising production costs and inflation.
Meanwhile, the leading processors of agricultural commodities have seen their profits increase. Archer Daniels Midland (NYSE:) shares traded at a new high above $70 in early 2022, and the trend continues higher. ADM stock's time high was $53.91, its December 2014 peak. In March 2020, as the pandemic gripped markets across asset classes, ADM plunged to a low of $28.92 per share. Since then, ADM rose to a new record and continued to rise. The price has more than doubled since the March 2020 low.
Source: bar chart
As the chart shows, ADM hit its most recent high at $71.55 on January 14. ADM has done little more than hit higher lows and higher highs since the March 2020 low.
Impressive earnings and an attractive Dividend
At $71.55 per share, ADM's market cap was slightly over $40 billion. The company pays shareholders an annual dividend of $1.48, representing a 2.22% return. ADMs have consistently beaten analysts' forecasts.
Source: Yahoo (NASDAQ:) Finance
The chart shows that ADM has posted gains that have exceeded consensus forecasts for the past four consecutive quarters. Analysts expect the company to report $1.32 per share for the fourth quarter of 2021 next week, when it announces earnings on Tuesday, January 25.
A survey of 15 analysts on Investing.com has an average price target of $70.64, with targets ranging from $63 to $80 per share.
Chart: Investing.com
The consensus on the stock by the majority of the analysts surveyed was "outperform". the 7% increase in 2021, the highest level in four decades. excluding food and energy, were up 5.5%, well above the Federal Reserve's 2% average target. The most recent data measuring wholesale prices of goods and services increased by nearly 10% in 2021.
The Fed has taken steps to address rising inflationary pressures by accelerating QE tapering, paving the way for the launch of a 0% Fed fund rate at the March FOMC meeting. The central bank is likely to move from quantitative easing to tightening as it seeks to shrink its swollen balance sheet by maturing debt securities and not replacing them at maturity.
Food prices rose in 2020 and became even more expensive in 2021. Prices of soybeans, corn and wheat soared to multi-year highs last year. Over the past two years, oilseed and grain futures posted double-digit percentage gains, with nearby soybean, corn and CBOT soft red winter wheat futures reaching their highest prices since 2012 in 2021
.
Over the period, most other grain prices recorded double-digit percentage gains. Rising agricultural prices are bullish for ADM, a company that is a supermarket to the world, meeting the nutritional needs of an ever-expanding addressable market due to population growth.
ADM has been in business since 1902, with headquarters in Chicago, the center of agricultural markets.
Addressing climate change through alternative and renewable energy sources expands ADM's business landscape. The company's website states:
"Today, biofuels such as ethanol and biodiesel are the main alternative transportation fuels available to consumers, and ADM is a leading producer of both."
The bull market in agricultural commodities, rising inflation and tackling climate change are creating a near-perfect bullish storm for Archer Daniels Midland, and profits should continue to rise.
ADM is an American company, but its tentacles make it a global leader in agribusiness alongside Bunge Limited (NYSE:) and privately held Cargill and Louis Dreyfus. The four companies dominate the agricultural sector.
ADM's market cap of $40 billion on Jan. 18 was nearly three times that of BG. At the $98.71 per share level, the market cap of BG was $13.87 billion.
Rising inflationary pressures should continue to support ADM's earnings in the coming year and likely push the stock price higher. ADM is a core holding company for portfolios looking for companies that will outperform the general stock market in an inflationary environment.
