Archer Daniels insiders made big buys into earnings-miss weakness, as analyst upgrades ADM

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Archer Daniels Midland (AMD) insiders made significant buys after ADM reported a $60 million drop in first-quarter profit due to the “bomb cyclone”. The CEO and CFO of the food conglomerate teamed-up to buy $1.26 million of stock into post-earnings price weakness.

On Friday ADM closed at $40.82, down 2%, after the company reported quarterly profit that fell 40%. But mid-day Monday, ADM’s CEO Juan Luciano filed a Form 4 disclosing a $1 million purchase at $42.76. In addition, CFO Ray Young reported a $256K buy at $42.30. Both trades were executed Friday morning.

ADM rebounded sharply Friday, closing at $43.27, recouping Friday’s losses and then some. An analyst upgrade likely contributed to the rebound. BMO Capital upgraded ADM to outperform and raised its target to $51.

Blame the bomb cyclone for ADM’s earnings miss.

According to Reuters, a major cause of ADM’s earnings shortfall was the “bomb cyclone” blizzards that devastated the Midwest and Great Plains this year. The bad weather caused massive flooding across Nebraska, Iowa and Missouri, washing out rail lines and wreaking havoc in the moving and processing of grains. One-sixth of U.S. ethanol production was halted.

“The first quarter proved more challenging than initially expected,” said Chairman and Chief Executive Juan Luciano, citing weaker earnings in its starches, sweeteners and bioproducts unit for the quarter ended March 31.

In March, ADM warned Wall Street that flooding and severe winter weather in the U.S. Midwest would reduce its first-quarter operating profit by $50 million to $60 million.

Ongoing turmoil in the ethanol industry also hurt Archer Daniels Midland and “limited margins and opportunities” for the business, said CEO Luciano. He also announced the company was considering spinning off its ethanol business.

Archer Daniels insiders made their most significant buys in dollar terms since 2003.

Obviously, Luciano viewed post-earnings price weakness as an opportunity, purchasing his company’s shares for the first time since Nov. 20, 2015. It was Luciano’s largest dollar purchase of ADM since taking the CEO role in January of 2015. He now owns about 864,000 shares or about $37.4 million worth of ADM.

Juan Luciano insider buying and selling since becoming ADM CEO. Source: WhaleWisdom
Filing DateCompanySymbolTransactionTrade Date Shares Avg. Price Total 
29-Apr-2019Archer-Daniels-Midland Co.ADMMarket Purchase29-Apr-2019         23,657 42.3 $ 1,000,690.00
20-Nov-2015Archer-Daniels-Midland Co.ADMMarket Purchase20-Nov-2015           2,772 36.03 $      99,872.40
04-Nov-2015Archer-Daniels-Midland Co.ADMMarket Purchase04-Nov-2015           4,715 42.36 $    199,706.00
05-Feb-2014Archer-Daniels-Midland Co.ADMMarket Purchase05-Feb-2014           2,612 38.2 $      99,768.10
02-Aug-2012Archer-Daniels-Midland Co.ADMMarket Purchase02-Aug-2012           3,932 25.43 $      99,983.30
18-Aug-2011Archer-Daniels-Midland Co.ADMMarket Purchase18-Aug-2011           3,650 27.5 $    100,375.00

Ray Young, CFO at ADM since 2010, made his first purchase since Nov. of last year. It was Young’s largest dollar purchase of ADM during his tenure as CFO.

Ray G. Young insider buying and selling since becoming ADM CFO. Source: WhaleWisdom
Filing DateCompanySymbolTransactionTrade Date Shares Avg. Price Total 
29-Apr-2019Archer-Daniels-Midland Co.ADMMarket Purchase29-Apr-2019         6,000 42.76 $   256,542
07-Nov-2018Archer-Daniels-Midland Co.ADMMarket Purchase07-Nov-2018         2,100 47.35 $     99,429
04-Nov-2015Archer-Daniels-Midland Co.ADMMarket Purchase04-Nov-2015         2,500 42.77 $   106,919
05-Feb-2014Archer-Daniels-Midland Co.ADMMarket Purchase05-Feb-2014         3,000 38.57 $   115,707
01-Nov-2013Archer-Daniels-Midland Co.ADMMarket Sale (Planned)01-Nov-2013         8,951 40.86 $   365,724
15-Nov-2012Archer-Daniels-Midland Co.ADMMarket Purchase15-Nov-2012         4,000 24.53 $     98,134
03-Aug-2012Archer-Daniels-Midland Co.ADMMarket Purchase03-Aug-2012         4,000 25.58 $   102,309
18-Aug-2011Archer-Daniels-Midland Co.ADMMarket Purchase18-Aug-2011         4,000 27.42 $   109,674

Simultaneous CEO and CFO insider buying is a notable bullish insider event. When the two officers who know their company best are putting more “skin in the game,” investors may want to pay attention. The $1.26 million purchases represent the most Archer Daniels insider buying since insider transactions converted from paper to digital in 2003.

Analysts see a 2019 U.S.-China trade deal as catalyst for ADM

BMO analyst Kenneth Zaslowto said the upgrade reflects an “expected earnings inflection starting later this year.” Going forward, Zaslowto sees “change driven by a structural improvement in operations, a benefit from non-recurring items and possible catalysts that include a U.S.-China trade resolution.

Also, analyst Ben Kallo of Baird lowered his price target from $54 to $48 but maintained an outperform rating. The analyst said a China trade deal would be a positive catalyst and a key driver of earnings in the second half of the year.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this blog is meant for educational and informational purposes only. Do your own research before investing and don’t risk more than you can afford to lose. This article expresses my own opinions, and I am not receiving compensation for it (other than from WhaleWisdom). I do not have a business relationship with any company whose stock is mentioned in this article. I or my associates may hold positions in the stocks discussed.