Normally, when a business comes out and says that it overstated profits, that’s a huge red flag, and investors bolt for the doors in a panic. That wasn’t the case for food processing company Archer Daniels Midland (NYSE:ADM), which saw shareholders pushing prices up nearly 4% in Tuesday morning’s trading. The reports from Archer Daniels Midland offered a stark picture. It overstated the historical profits of its nutrition business by as much as 10%.
Those profits have been on the rise for some time now, perhaps not coincidentally, at the same time inflation has sent grocery store prices blasting upward. But the numbers that have emerged so far were suspicious even with the macroeconomic conditions at play, and Archer Daniels Midland is now bringing the results of an accounting probe to light.
The probe has revealed disturbing trends, so much so that Archer Daniels Midland’s chief financial officer was put on leave. Indeed, the issue goes so far that the Securities and Exchange Commission (SEC) has started a criminal investigation, and a grand jury has already launched subpoenas for documents.
Commodities Drawing Interest
Yet, even as this took place, investors didn’t seem especially fazed by it. Indeed, Steve Weiss—Short Hills Capital Partners founder and managing partner—noted that he bought in on Archer Daniels Midland, selling several shares of Freeport-McMoRan (NYSE:FCX) to do so. Why? Weiss noted he wanted to be “more in commodities,” a move that makes sense given the macroeconomics out there.
After all, one of the last cuts that people will make to their household budget is with food because, at that point, even the necessities are expensive.
Is Archer Daniels Midland Stock a Buy?
Turning to Wall Street, analysts have a Hold consensus rating on ADM stock based on 10 Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 24.49% loss in its share price over the past year, the average ADM price target of $63 per share implies 9.99% upside potential.
