ADM Stock: Growth Gains vs. Valuation and Execution Risks Remain Ahead

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Earnings Momentum Improves

ADM reported second-quarter 2026 adjusted earnings of $1.84 per share, up from 93 cents in the year-ago quarter and ahead of the Zacks Consensus Estimate by 29.6%. Revenues increased 7.1% year over year to $22.68 billion. Total segment operating profit rose 75% year over year to $1.45 billion, supported by gains across all three operating segments.

The company raised its 2026 adjusted EPS outlook to $5.15-$5.60 from the previous range of $4.15-$4.70. Management attributed the higher guidance to improved execution, a favorable biofuels margin environment and continued progress in Nutrition.

Ag Services & Oilseeds remained the largest earnings contributor. Second-quarter segment operating profit increased 129% year over year to $867 million, helped by margin expansion, higher asset utilization and favorable crushing conditions. Global oilseed volumes increased nearly 5% year over year, while stronger soybean meal demand supported export growth.

Carbohydrate Solutions also benefited from ethanol market strength. Segment operating profit increased 22% year over year to $411 million as policy incentives, elevated energy prices and lower U.S. corn prices improved ethanol economics.

Nutrition Recovery Adds Growth Support

ADM’s Nutrition segment is becoming an important part of its earnings recovery. Second-quarter operating profit increased 51% year over year to $172 million, driven by improvements in both Human Nutrition and Animal Nutrition. Human Nutrition benefited from Flavors growth and progress at the Decatur East plant, while Animal Nutrition improved following portfolio actions taken in 2025.

The company is also targeting growth opportunities in natural colors. Management estimates a roughly $1 billion U.S. addressable revenue market for the transition from artificial to natural colors and expects the opportunity could contribute $80-$100 million in operating profit over time. ADM has secured customer contracts and is investing in naturally derived color production capacity.

Beyond Nutrition, ADM is expanding investments in precision fermentation, biosolutions and decarbonization. The company sequestered approximately 337,000 metric tons of carbon in second-quarter 2026 and continues to develop projects tied to its existing processing assets.

Valuation and Execution Risks

The recent share-price recovery has improved ADM’s valuation profile but also raises expectations. The stock’s forward earnings multiple is above its five-year median of 12.6X, although it remains below the five-year high of 18.9X.

ADM’s earnings remain exposed to commodity markets and timing-related volatility. Second-quarter Ag Services & Oilseeds results included around $100 million of net positive mark-to-market and timing impacts, which may not reflect underlying operating performance and can reverse in future periods.

The company also faces execution risks as it balances growth investments, cost savings and shareholder returns. ADM expects capital expenditures of $1.3 billion to $1.5 billion in 2026 while pursuing capacity expansions, precision fermentation investments and facility modernization. Its cost savings program targets $500-$750 million of aggregate savings over three to five years beginning in 2025, but achieving those benefits will depend on continued execution.

Trade and policy conditions remain another variable. ADM’s outlook assumes continued Chinese purchases of North American soybeans, including progress toward a 25-million-ton U.S. soybean purchase commitment in 2026. Any changes in trade flows or geopolitical conditions could affect agricultural margins and earnings.

ADM operates across agricultural processing, food ingredients, animal nutrition and specialty solutions markets. Its competitive landscape includes companies such as Adecoagro S.A. AGRO and Ingredion Incorporated INGR, which provide exposure to agricultural commodities, food ingredients and value-added processing.

Bottom Line

ADM’s earnings recovery has gained momentum, supported by biofuels demand, manufacturing improvements and a stronger Nutrition business. The company’s raised 2026 outlook and favorable Zacks Style Scores highlight improving fundamentals, but valuation expansion and continued exposure to commodity cycles leave execution and market risks in focus.

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This article originally published on Zacks Investment Research (zacks.com).

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