Archer Daniels Earnings Boost Biofuels and Crush Capacity Growth Prospects Now

ADM also has a VGM Score of A, with a Value Score of A, Growth Score of B and Momentum Score of A. The Zacks Style Scores complement the Zacks Rank by evaluating stocks on value, growth and momentum characteristics, with the VGM Score combining the weighted average of the individual Style Scores.

Biofuels and Crushing Drive Earnings Recovery

ADM reported second-quarter 2026 adjusted earnings of $1.84 per share, up 98% year over year and ahead of the Zacks Consensus Estimate by 29.6%. Revenues rose 7.1% year over year to $22.68 billion. Total segment operating profit increased 75% year over year to $1.45 billion, supported by gains across Ag Services & Oilseeds, Carbohydrate Solutions and Nutrition.

The Ag Services & Oilseeds segment benefited from stronger crushing margins and improved asset utilization. Segment operating profit jumped 129% year over year to $867 million, helped by favorable biofuels conditions, elevated energy prices and improved execution. Global oilseed processing volumes increased nearly 5% year over year during the quarter.

ADM’s Crushing subsegment delivered a major improvement, with operating profit rising by $330 million from the prior-year quarter. The company cited stronger biofuels margins supported by renewable volume obligations, higher energy prices and solid global demand for soybean meal.

Crush Capacity Expansion Could Add Growth

ADM is investing in its existing processing footprint to expand crushing capacity. The company has identified 10 U.S. crush facilities with potential capacity unlocks and is moving ahead with a first phase involving four locations. Management expects these debottlenecking projects to require about one-fourth the capital intensity of a new greenfield facility, with the initial phase potentially requiring around $100 million.

The company’s recent capacity investments are aimed at increasing throughput and improving flexibility while supporting renewable fuel demand. ADM expects these upgrades to unlock roughly 700,000 metric tons of additional annual crush capacity across four facilities, creating more than 25 million bushels of new demand for U.S. farmers.

ADM is also evaluating ethanol debottlenecking opportunities as improving yields and cost reductions create additional capacity potential.

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Nutrition Adds Another Growth Driver

Beyond commodity processing, ADM continues to expand higher-margin businesses. Nutrition operating profit increased 51% year over year to $172 million in the second quarter, 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 gained from operational improvements and portfolio actions.

ADM is also pursuing opportunities in natural colors, precision fermentation, biosolutions and decarbonization.

Management estimates the U.S. natural-colors transition represents an approximately $1 billion addressable revenue market and is targeting $80 million to $100 million of operating profit over time.

Outlook Improves on Execution

Following the strong first-half performance, ADM raised its 2026 adjusted EPS outlook to $5.15-$5.60 from the previous range of $4.15-$4.70. Management expects continued improvement in crushing and ethanol, supported by the biofuels margin environment, while Nutrition is expected to maintain its recovery.

The company also expects cost-saving initiatives to contribute over time. ADM remains on track with its enterprise-wide savings program, which targets $500 million to $750 million of aggregate savings over three to five years beginning in 2025.

Ingredion Incorporated INGR, meanwhile, is a closer comparison with ADM’s higher-value ingredient operations. INGR converts grains and other plant-based raw materials into starches, sweeteners and specialty ingredient solutions for food, beverage and industrial customers. Adecoagro S.A. AGRO operates across food and agriculture, sugar, ethanol and energy, giving it meaningful exposure to renewable fuels alongside agricultural commodities.

Risks to Watch

Despite the improved outlook, ADM remains exposed to commodity price swings, crush-margin volatility and mark-to-market impacts. Second-quarter results included about $100 million of net positive mark-to-market and timing impacts, which can create earnings volatility depending on market movements.

The company also faces uncertainty from trade conditions, geopolitical developments and policy changes that could affect agricultural flows and margins. ADM’s outlook assumes continued North American soybean purchases from China, including progress toward a 25-million-ton U.S. soybean purchase commitment in 2026.

With improving earnings trends, capacity expansion plans and favorable Zacks metrics, ADM’s combination of near-term earnings momentum and longer-term investments remains a key factor supporting the stock’s outlook.

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

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