Archer-Daniels Midland Stock is Rock Steady, but is it a Buy?

Key Points

• Archer-Daniels Midland stock is up more than 8% after the company's earnings report shed some light on a DOJ accounting probe. 
• The company's business is slowing; however, the dividend is solid, and the underlying demand remains solid. 
• Traders may not have much to like, but ADM stock is still a strong long-term buy.  

Archer-Daniels Midland Company NYSE: ADM stock is up more than 8% after the company reported fourth-quarter and full-year 2023 earnings on March 12. The company missed on both the top and bottom lines, but that wasn't the big story. Investors are feeling relief after receiving information about the accounting probe that the company announced in January 2024.  

ADM is one of the top agricultural components among consumer staples stocks. The company's products are essential in the manufacturing of consumer goods, including food, beverages, animal feed, and industrial products.   

An Update on the Accounting Probe ... Sort Of 

Analysts and investors were waiting to hear any update the company had regarding the accounting probe that the company announced after suspending its chief financial officer (CFO), Vikram Luthar, in January 2024. At that time, the company cut its earnings outlook pending an outside counsel inquiry into accounting practices involving its nutrition segment.  

There was little that the company could say since this has become a Department of Justice (DOJ) probe based on an SEC inquiry. However, on the call, chairman, CEO and president, Juan Ricardo Luciano, remarked, "In connection with our internal investigation, we corrected certain intersegment sales that occurred between our Nutrition reporting segment and our Ag Services and Oilseeds and Carbohydrate Solutions reporting segments that were not recorded at amounts approximating market."  

Luciano further explained that those adjustments were not material to the company's consolidated financial statements when taken as a whole for any period. 

That seemed to be enough for some investors as the stock is well off the 52-week low it hit in late January.  

The Company's Business is Slowing 

With some clarity on the accounting scandal, investors can concentrate on the company's business performance. For the full year 2023, Archer-Daniels Midland posted earnings per share (EPS) of $6.98, which was a loss of around 9% compared with 2022.  

Furthermore, the company is guiding for lower full-year earnings in 2024, ranging between $5.25 and $6.25. What may be causing analysts pause is the range of the guidance, which suggests that the company is trying to navigate a wide range of outcomes.  

The King Retains Its Crown 

Archer-Daniels Midland is part of an exclusive club of companies called Dividend Kings. These companies have all increased their dividends for at least 50 consecutive years. For ADM, that number is 52 years and counting.  

The dividend yield is currently 3.32%, and shareholders get $2 per share annually. And with a 31.25% payout ratio, there's no concern that this king will lose its crowd anytime soon. 

Analysts Have a Mixed Picture on ADM Stock 

The Archer-Daniels Midland analyst ratings on MarketBeat have a Reduce rating on ADM stock. But since they're likely digesting the update on the accounting probe, analysts may be waiting to weigh in on the latest report. One exception is Stifel Nicolaus, which delivered a Hold rating on March 14, 2024, with a price target of $58. Barclays also reiterated its Sell rating.  

Those ratings may impact traders who may not be enthusiastic about the stock until the accounting probe is fully resolved. But for long-term investors, Archer-Daniels Midland is still delivering the goods: share buybacks, a safe dividend, and a stable market and moat for its products.