JP Morgan Initiates Coverage of Archer Daniels Midland (ADM)

JP Morgan Initiates Coverage of Archer Daniels Midland (ADM)


JP Morgan reported on Monday that they have initiated coverage on agricultural company, Archer Daniels Midland Company(ADM).

The firm has begun their coverage of ADM with an “Underweight” rating and a $28 price target. This price target suggests a -4% decline from the stock’s current price of $29.22.

A JP Morgan analyst noted, “ADM’s North American capacity (67% of total) is likely to remain under pressure for the foreseeable future as a result of the Midwest drought and the resulting lack of supply of crops; this is likely to pressure margins in its Oilseeds Processing and Ag Services businesses in H1’13. In addition, ADM’s ethanol business continues to face demand as well as cost headwinds, and margins could get worse before they get better. While ADM is already trading at a discount to peers and was down 2% in 2012 (vs. S&P up 16%), we believe this is justified given the continued earnings risk in several businesses; hence, our Underweight rating with a YE’13 price target of $28.”

Archer Daniels Midland shares were down 22 cents, or -0.75% during premarket trading Monday. The stock has been mostly flat in the past year.

The Bottom Line
Shares of Archer Daniels Midland (ADM) have a 2.40% dividend yield, based on Friday’s closing stock price of $29.22. The stock has technical support in the $25-$26 price area. If the shares can firm up, we see overhead resistance around the $30-$31 price levels.

Archer Daniels Midland Company(ADM) is not recommended at this time, holding a DARS™ Rating of 3.2 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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