Jim Cramer’s Latest Lightning Round: 10 Stocks to Watch

5. Archer-Daniels-Midland Company (NYSE:ADM)

Number of Hedge Fund Holders: 35

Archer-Daniels-Midland Company (NYSE:ADM) is involved in the procurement, processing, and marketing of agricultural commodities and ingredients, with operations spanning regions such as the United States, Europe, and Brazil.

The company runs through three segments, Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. It manages a wide range of products, including soybean meal, vegetable oils, sweeteners, animal feed, and specialty food ingredients, along with offering commodity brokerage services that support its extensive role within the agricultural supply chain.

Mentioning Archer-Daniels-Midland (NYSE:ADM), Cramer said “I think it is a value trap”.

According to a consensus of 12 analysts, the EPS is expected to decrease by a little over 23% year-over-year in 2024. In 2025, the company’s EPS is expected to be 22.5% below 2023 levels.

Additionally, in the second quarter, the company faced significant challenges, resulting in a nearly 12% decline in revenue, totaling $22.25 billion.

The Ag Services and Oilseeds segment was particularly affected, experiencing a steep 56% drop in profits. The Nutrition segment also reported a decline, with profits decreasing by 36%.

The company attributed the struggles in Ag Services and Oilseeds to several factors, including reduced selling activity from farmers due to a smaller crop in Mato Grosso, rising logistics costs from take-or-pay contracts, increased supply from Brazil and Argentina, and narrowing soybean crush margins.

The economic pressures contributed to a decline in Archer-Daniels-Midland (NYSE:ADM) earnings, which fell to $1.03 per share compared to the previous year, primarily driven by lower crush and origination margins.

Earnings before taxes for the second quarter amounted to $596 million, a 47% decrease, which was linked to lower pricing, reduced execution margins, and increased unallocated corporate costs.

Diamond Hill Capital stated the following regarding Archer-Daniels-Midland Company (NYSE:ADM) in its Q2 2024 investor letter:

“We exited three positions in Q2, including Generac Holdings, NXP Semiconductors and Archer-Daniels-Midland Company (NYSE:ADM). Agricultural commodities and products company Archer-Daniels-Midland recently announced a nutrition-segment accounting issue — while it didn’t require a restatement of consolidated financials, we think it may be the proverbial canary in the coal mine. As we consequently lost our confidence in the management team, we exited our position.”