ADM Earnings Are a Shareholder's Dream

Despite a dramatic drop in ethanol results, ADM (ADM) still pulled in a very strong quarter. See the link below:ADM 2Q FY09 Earnings Release

Call Transcript

One thing of note here is the Ag Division. ADM is using the current world weakness to pick up properties at distressed prices. Global demand for food is not going to fall. It may wane in certain areas as diets change based on wealth, ADM is at the crux of that demand.

If the U.S. increases biofuel use as President Obama says he is going to do, then this division of ADM really has nowhere to go but up.

Given what we have seen this earnings season, growing earnings 24% is just a shareholder's dream...

Disclosure: Long ADM

Comments

[redbaron:]

Something doesn't compute here. Obama wants to increase bio-fuel production, but ADM reports just yesterday that 22% of US ethanol production has been shut-down. At least one ethanol producer has declared bankruptcy, and another couple are close. And yet, ADM, the country's biggest ethanol producer reports increased earnings. ADM has lots of diversification, and one can only conclude that the increased earnings is not from ethanol. However, if ethanol production is increased, and ADM plays a role in that increase, one has to wonder if that is a positive, or a negative, for ADM. I wish the author would explain this 'problem'.

Feb 04 07:09 AM

[socphd71:]

This story may be helpful in understanding why ADM's profits are so hard to understand:
biz.yahoo.com/ap/09020...

Feb 04 08:44 PM

[legmaker:]

I think this is a great call Todd. I still think we are in the midst of a commodity based bull run, although right now commodities along with everything else is taking a breather. I know someone is going to call me on this, but its the same reason that people are buying gold. We are throwing money at our current problems, when throwing money at problems in the past got us where we are today. I am not saying it is the wrong idea, but the only thing we can do right now as deflation is very difficult to stop, but inflation is much easier. The way we are going now, I believe that we are going to see inflation comparable to that of the Reagan (Bless his soul) years.
If corn prices remain low, it will improve ADM's margins. If the prices increase, they will make corresponding price increases. Ethanol is also a very interesting part of the equation. Ethanol prices have plummeted because gasoline demand has decreased. The less gasoline we use, the less ethanol is used as an additive. E85 is a very small portion of the picture as many places still don't sell it and it can be tough to find depending on where you live.
The one thing people are not talking about is there current deal with LNDC. ADM making a biodegradable plastic wrap. This wrap is being implemented into grocery stores to wrap things like hamburger and vegetables. This may not be a big revenue source now, but when petroleum prices go up, and they will at some point, this will be big. I think ADM is a buy here, especially if you got in towards the end of the trading day. If that is the case then you will probably get a pop in the morning. ADM could still see $20, if it does pull the trigger. Great job and God Bless.

Feb 05 01:27 AM

[osaycanuthink:]

adm will do very well as long as they support politicans and recieve the bonus on every gallon of ethanol they produce..

Apr 19 09:32 AM