Investopedia: ADM Working Through A Lull

One quarter ago, I opined that Archer Daniels Midland (NYSE:ADM) looked like a good stock for patient investors. With the stock having doubled the return of the S&P 500 over that brief time period, so far so good. ADM's business is always going to be a volatile, commodity-driven enterprise, but the company does earn long-term economic returns on an asset base that would be extremely difficult (and expensive) to replicate.

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Investopedia: No Quick Fixes At ADM, But The Value Is There

A quarter ago I was pretty positive on the shares of Archer Daniels Midland (NYSE:ADM). This was not so much because I saw a dramatic turnaround coming in the business, but because I saw it as a good long-term value. Although fiscal second quarter earnings show that there are still some very real challenges, investors really haven't hurt themselves by owning these shares as a long-term value.

Another Difficult (and Complicated) Quarter  
All in all, the fiscal second quarter was not very good for ADM. Reported revenue did rise 11% and the company posted gaudy-looking growth in oilseeds processing (up 28%) and corn processing (up 29%), while the huge ag services business saw a 1% sales decline.

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Investopedia: Cosan Could Look A Little Sweeter In 2012

Ethanol has a dicey reputation with investors. The petroleum alternative has enticed more than a few true-believing green investors into thinking it's somehow more than a commodity, before dashing their dreams and denting their net worth. Brazil's reputation is scarcely better, as investors have had to ride the ups and downs of a promising, but very volatile, market for years. Combining these two into one investment may seem like lunacy to some, but Cosan (NYSE:CZZ) may be a name to consider for 2012 and beyond.

One of the Biggest, One of the Best 

Cosan is one of the largest sugar and ethanol producers in the world and the largest sugarcane crusher. The company operates 24 mills, two refineries and two ports in Brazil and currently has a little over 60 million tonnes of crush capacity. In fact, about 5% of the world's ethanol comes out of Cosan facilities.

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Investopedia: Ups And Downs Par For The Course At ADM

Archer Daniels Midland (NYSE:ADM) is a good example of what is wrong about Wall Street today. In the short-term world of sell-side research and institutional investors, there is a great deal of angst over quarter-to-quarter moves and the volatility of commodity prices. Here's the long-term reality, though: processed food is here to stay and ready to explode in emerging markets, agricultural refining is an industry that rewards scale and ADM is one of the biggest fish in the ocean. (For more, check out What Is An Emerging Market Economy?)

A Tough Third Quarter  

ADM reported the sort of quarter that will have some investors doing double-takes. After all, 30% reported net sales growth seems amazing, for a company of this size. Reported growth was strong across the board: oilseed processing revenue rose 29%, corn processing revenue rose 51% and ag services revenue rose 33%.

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http://stocks.investopedia.com/stock-analysis/2011/Ups-And-Downs-Par-For-The-Course-At-ADM-ADM-BG-CPO-ANDE-CZZ-KO-PEP-GIS1107.aspx

Investopedia: A Bumper Crop For ADM

When analysts can follow a company, to say nothing of an industry, for years and still routinely find their numbers wide of the market, that should say something about the likelihood of part-time investors figuring out the vagaries of the commodity markets. With global food and grain markets in turmoil, there should have been little doubt that it would impact the operations of Archer Daniels Midland (NYSE:ADM), but apparently even the most optimistic analysts underestimated ADM's ability to position itself to best advantage. 

The Quarter that Was
It is not often that a company that measures quarterly revenue in the tens of billions posts better than 30% growth, but that is what ADM did for its fiscal second quarter. Sales jumped over 31% this period, led by incredibly strong results in the company's Ag Services business (merchandising/handling of grain), but oilseeds and corn processing were hardly laggards with nearly 28% and 22% growth respectively.

For the most part, ADM also did an admirable job of translating that sales momentum into better profitability. Segment operating profits jumped 40% overall, despite an 8% decline in the oilseeds business. As Ag Services' profits nearly tripled, that would have easily covered up a lot of mistakes elsewhere ... had there been many. While the company's bottom-line earnings are a mess of charges, gains and non-operating items, the company still handily beat estimates.

The Good and Bad of ADM
ADM owed this strong quarter in part to the weather troubles in places like Russia. With Russia's harvest compromised, U.S. agricultural exports boomed and ADM clearly benefited from its middleman role in that trade. This, by the way, is also why the cash flow performance was not so good and was so different than the reported earnings - as a huge global trader with large origination, storage and delivery capabilities in the grain market, ADM can (and sometimes must) be opportunistic about building inventories, and that can wreak havoc on cash flow in any given period. 


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