Agricultural issue Archer Daniels Midland Company (NYSE: ADM) is sharply lower in today's trading after falling short of Wall Street's earnings expectations. The company confessed to a 98% slide in third-quarter net income, thanks to hefty investment losses and a weak pricing environment.
ADM reported a profit of $8 million, or 1 penny per share, compared to its year-ago results of $517 million, or 80 cents per share. Investment losses for the period totaled 36 cents per share. Revenue for the quarter tumbled 21% to $14.8 billion, impacted by strength in the U.S. dollar and softer commodity prices. As a result, gross margin contracted from 6.2% to 4.4%.
Analysts were expecting significantly stronger earnings of 49 cents per share on revenue of $16.9 billion, according to Thomson Reuters. Option players also had high hopes for ADM; in the 10 days preceding the earnings report, traders on the International Securities Exchange (ISE) bought to open two times more calls than puts.
Those optimistic investors are no doubt disappointed by today's report. ADM is down more than 6% at last check, ending a three-day streak above its 10-day moving average. The shares have shed 40.6% of their value during the past 52 weeks, and they're struggling beneath stubborn resistance from their 10-month trendline.
As bullish sentiment toward ADM begins to unravel, look for the ethanol producer to extend its pullback during the short term.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
Entrepreneur's Journal: Putting together a solid sales contract
The week in preview: Earnings from Walmart, Macy's, and other retailers
Six top trades for the rest of 2009
