Despite recent hardships due to drought-related issues, analysts at Miller Tabak & Co. upgraded Archer Daniels Midland Company (ADM) on Wednesday as they believe the agricultural company is in a position to see post-drought recovery.
The analysts upgraded ADM from “Neutral” to “Buy” and raised price target from $26 to $34. The new target is a +24.1% upside to Monday’s closing price of $27.39.
An analyst at Miller Tabak commented, “In our view, the drought-related (i.e. Mississippi river levels) and M&A risks to ADM’s long-term investment case have been increasingly priced into shares. While earnings volatility may persist during the next two quarters, we believe it is reasonable for investors to shift their focus to a post-drought earnings recovery at current valuation levels. With shares currently trading at ~10x FY:14 consensus EPS (June YE) and ~1x tangible book value, we would encourage investors to capitalize on market volatility in Q1 and initiate an overweight portfolio position. More importantly, we believe ADM is pro-actively managing underlying corn cost risk by remaining disciplined on the M&A front, taking efforts to shore up its balance sheet, and leveraging tight corn syrup capacity levels to secure satisfactory 2013 price contracts for HFCS.”
Archer Daniels Midland shares were up 42 cents, or +1.53%, in premarket trading on Wednesday.
The Bottom Line
Shares of Archer Daniels Midland (ADM) have a 2.56% dividend yield, based on Monday’s closing stock price of $27.31. The stock has technical support in the $24-$25 price area. If the shares can firm up, we see overhead resistance around the $29-$30 price levels.
Archer Daniels Midland Company (ADM) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.2 out of 5 stars.
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