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The Bull Case For Archer-Daniels-Midland (ADM) Could Change Following Morgan Stanley’s Downgrade On Margin Concerns

Simply Wall St · 5d ago
  • Morgan Stanley recently downgraded Archer-Daniels-Midland (ADM) to Underweight, pointing to regulatory delays, weakening margins in its Carbohydrate Solutions unit, and repeated cuts to its 2025 profit outlook amid biofuel policy uncertainty and trade disruptions.
  • The downgrade highlights how margin pressure in key processing businesses and softer agricultural services and oilseed profits are increasingly challenging ADM’s ability to deliver the earnings profile analysts had been expecting.
  • Against this backdrop of regulatory delays and softer Carbohydrate Solutions margins, we’ll now assess how the downgrade could reshape ADM’s investment narrative.

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Archer-Daniels-Midland Investment Narrative Recap

To own ADM, you need to believe in the value of its global processing network and its ability to earn acceptable returns through agricultural and biofuel cycles. Morgan Stanley’s downgrade underlines that the key near term catalyst of policy clarity around biofuels is now more uncertain, while the biggest current risk is sustained margin pressure in Carbohydrate Solutions and Ag Services & Oilseeds that has already fed into lower 2025 profit guidance.

Against that backdrop, ADM’s recent 2025 earnings results, which showed Q3 profit of US$108 million and its weakest annual earnings since 2019, are highly relevant. They give investors a clearer sense of how regulatory delays, US biofuel policy uncertainty and trade disruptions are flowing through to reported margins and earnings, and how much room the company may have to support its dividend and future capital allocation if conditions stay challenging.

Yet investors should be aware that frequent changes in biofuel policy and tax credits could keep ADM’s earnings more volatile than many expect...

Read the full narrative on Archer-Daniels-Midland (it's free!)

Archer-Daniels-Midland's narrative projects $88.6 billion revenue and $2.1 billion earnings by 2028.

Uncover how Archer-Daniels-Midland's forecasts yield a $56.90 fair value, a 4% downside to its current price.

Exploring Other Perspectives

ADM 1-Year Stock Price Chart
ADM 1-Year Stock Price Chart

Thirteen members of the Simply Wall St Community currently estimate ADM’s fair value between US$31.64 and US$72.54, showing a wide range of embedded expectations. When you weigh those views against the recent downgrade tied to weaker processing margins and biofuel policy uncertainty, it underlines why many investors compare several perspectives before forming an opinion on the company’s prospects.

Explore 13 other fair value estimates on Archer-Daniels-Midland - why the stock might be worth 47% less than the current price!

Build Your Own Archer-Daniels-Midland Narrative

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.