Wall Street avidly follows quarterly earnings, to the point that even a small surprise against expectations can significantly move a stock.
Archer Daniels Midland
, a negative surprise is no surprise at all.
For the sixth consecutive quarter, ADM Friday surprised the Street, falling short of earnings targets by 6 cents. In the last six quarters the company has surprised on the downside four times and on the upside twice.
The company reported net income of $36.3 million, or 6 cents a share, compared to $116.8 million, or 19 cents a share, in the year-ago quarter. Analysts surveyed by
First Call/Thomson Financial
predicted the Decatur, Ill.-based company would earn 12 cents a share.
With ADM, though, analysts are basically just guessing.
"The answer to every question everybody asks them is they don't know, they don't won't tell you or it depends on the weather," said William Leach, who covers the stock for
, which doesn't have an underwriting relationship with ADM. Leach has an underperform rating on the stock.
The company did not provide any figures beyond the number of shares outstanding, earnings per share and net earnings.
"They don't give you anything, they don't give you pretax," Leach said. "ADM always has two reporting periods -- when the press release comes out and when they file with the
For Archer, the grain and soybean processing giant, a lot of business really does depend on the weather. The company's products are used for a range of ends including animal feed additives, biotechnology and creating hybrid plants. Its motto is "feeding the world."
But ADM's world has gotten smaller in recent years, and its production capacity has not. The company has extended itself far beyond the demand for processed agricultural products. Reasons for the shrinking demand range from Mexican tariffs to Asian deflation that has led the Chinese to buy soybeans and crush them themselves instead of buying ADM's products.
Clinton Mayer, who covers the stock for
, said there were signs that the company is tightening production capacity. The conference call left the impression that ADM would spend $400 million on factories this year, as opposed to the $1 billion, including acquisitions, it spent in recent years, he said.
"We've already seen the bottom of this business; the next question is how fast it will pick up," said Mayer.
Burnham buys stocks for its own accounts and does not own ADM shares, according to First Call.
The stock fell 7/8 point, or 6.9%, to close at 11 13/16 Friday.