Archer-Daniels-Midland (ADM)

Agricultural supply chain giant Archer-Daniels-Midland (NYSE:ADM) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2.2% year on year to $20.37 billion. Its non-GAAP profit of $0.92 per share was 7.9% above analysts’ consensus estimates.

Company Overview

Transforming crops from the world's most productive agricultural regions into everyday essentials, Archer-Daniels-Midland (NYSE:ADM) processes and transports agricultural commodities like grains and oilseeds while manufacturing ingredients for food, beverages, feed, and industrial applications.

Ingredients, flavors, and fragrances companies supply essential components to food, beverage, personal care, and household product manufacturers. These firms develop proprietary formulations that enhance taste, scent, and texture, creating customer stickiness through specialized expertise and regulatory-approved ingredient portfolios. Tailwinds include growing consumer demand for natural and clean-label products, expansion in emerging markets, and innovation in plant-based and functional ingredients. However, headwinds persist from volatile raw material costs, particularly for agricultural and petrochemical inputs. Regulatory scrutiny over synthetic additives and fragrance allergens poses compliance challenges, while consolidation among major customers increases pricing pressure and negotiating leverage against suppliers.

ADM's competitors include other global agricultural processors and traders such as Bunge Global (NYSE:BG), Cargill (privately held), Louis Dreyfus Company (privately held), and Wilmar International (SGX:F34), in which ADM holds a 22.5% stake.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $83.21 billion in revenue over the past 12 months, Archer-Daniels-Midland is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only a finite number of major retail partners, placing a ceiling on its growth. For Archer-Daniels-Midland to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Archer-Daniels-Midland struggled to generate demand over the last three years. Its sales dropped by 5.5% annually despite consumers buying more of its products. We’ll explore what this means in the "Volume Growth" section.

This quarter, Archer-Daniels-Midland’s revenue grew by 2.2% year on year to $20.37 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and suggests its newer products will catalyze better top-line performance.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

Archer-Daniels-Midland’s average quarterly volume growth of 1,357,800,000% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector.

In Archer-Daniels-Midland’s Q3 2025, sales volumes jumped 1,346,900,000% year on year. This result was in line with its historical levels.

Archer-Daniels-Midland has bad unit economics for a consumer staples company, signaling it operates in a competitive market and lacks pricing power because its products can be substituted. As you can see below, it averaged a 6.2% gross margin over the last two years. Said differently, for every $100 in revenue, a chunky $93.80 went towards paying for raw materials, production of goods, transportation, and distribution.

This quarter, Archer-Daniels-Midland’s gross profit margin was 2.4%, down 4.5 percentage points year on year. Archer-Daniels-Midland’s full-year margin has also been trending down over the past 12 months, decreasing by 1.8 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Archer-Daniels-Midland was profitable over the last two years but held back by its large cost base. Its average operating margin of 2.3% was weak for a consumer staples business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Archer-Daniels-Midland’s operating margin decreased by 1 percentage points over the last year. Archer-Daniels-Midland’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Archer-Daniels-Midland generated an operating margin profit margin of 1.9%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

In Q3, Archer-Daniels-Midland reported adjusted EPS of $0.92, down from $1.09 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 7.9%. Over the next 12 months, Wall Street expects Archer-Daniels-Midland’s full-year EPS of $3.69 to grow 4.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Archer-Daniels-Midland has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.8%, subpar for a consumer staples business.

Taking a step back, an encouraging sign is that Archer-Daniels-Midland’s margin expanded by 1.6 percentage points over the last year. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Archer-Daniels-Midland’s free cash flow clocked in at $1.51 billion in Q3, equivalent to a 7.4% margin. This result was good as its margin was 2.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Archer-Daniels-Midland’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.1%, slightly better than typical consumer staples business.

Archer-Daniels-Midland reported $1.24 billion of cash and $7.86 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.79 billion of EBITDA over the last 12 months, we view Archer-Daniels-Midland’s 1.7× net-debt-to-EBITDA ratio as safe. We also see its $164 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Archer-Daniels-Midland blew past analysts’ adjusted operating income expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its gross margin missed and its revenue fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock remained flat at $58.25 immediately after reporting.

Before investing in or passing on Archer-Daniels-Midland, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Archer-Daniels-Midland isn’t a terrible business, but it doesn’t pass our bar. To kick things off, its revenue has declined over the last three years. And while its volume growth has been in a league of its own, the downside is its declining EPS over the last three years makes it a less attractive asset to the public markets. On top of that, its gross margins make it more challenging to reach positive operating profits compared to other consumer staples businesses.

Archer-Daniels-Midland’s P/E ratio based on the next 12 months is 15.2x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $56.90 on the company (compared to the current share price of $58.25).