Friday, February 23, 2024
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ADM Stock Alert: Archer-Daniels-Midland Plunges on CFO Probe

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Shares in agriculture processor Archer-Daniels-Midland (NYSE:ADM) plunged 16% over the weekend on a probe of its accounting. Now, ADM stock is down about 19% as of this writing.

Chief Financial Officer Vikram Luthar was placed on leave as part of the probe. The problems relate to the company’s $8 billion Nutrition segment. In 2022, Archer-Daniels-Midland reported annual revenue of about $102 billion, per Barron’s.

Along with sidelining Luthar, the company cut its 2023 adjusted earnings forecast to $6.90 per share, lower than the $7.27 per share expected by analysts. Operating income is expected to be “drop more than 18% in 2023.”

ADM Stock: Trouble at the Mill

Archer-Daniels-Midland was founded in 1902 and gained notoriety in the 1970s under then-CEO Dwayne Andreas, who made ADM a global company known for its high fructose corn syrup. Later, the company was involved in a price-fixing scandal, the basis for the Matt Damon film The Informant!

Before becoming the corporate Chief Financial Officer of Archer-Daniels-Midland, Luthar served as CFO for the Nutrition segment. The executive has been with the company since 2004.

ADM’s Nutrition segment became a focus after the company bought European natural ingredient maker Wild Flavors in 2014. Results, however, have been disappointing. The unit was particularly troubled in 2023 due to slowing sales of plant-based protein, the restructuring of its animal nutrition unit and “an explosion at a soybean processing plant,” per MarketWatch. Ian Pinner, another long-time executive at the firm, was put in charge of the unit in November.

Shares in rival Bunge Global (NYSE:BG) have also been under pressure lately. That follows “damage to a natural gas pipeline” that feeds its soybean processing facility in Decatur, Indiana.

What Happens Next?

The move lower in ADM stock may be overdone. However, it will take time for Archer-Daniels-Midland to regain investor trust. Meanwhile, Bunge is selling at 7 times earnings and sports a forward dividend yield of 2.86%.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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