UBS lifts ADM stock rating to Buy, raises target to $60

On Monday, UBS analyst Manav Gupta upgraded shares of Archer Daniels Midland (NYSE:ADM) from Neutral to Buy and increased the price target to $60 from the previous $55. Gupta cited potential policy benefits and an optimistic outlook for the company’s nutrition segment as key drivers for the upgrade. The stock, currently trading at $50.13, appears undervalued according to InvestingPro analysis, with a market capitalization of $24.1 billion and a P/E ratio of 17.7x.

The upgrade is grounded in anticipated policy tailwinds from the Budget Reconciliation bill currently under review by the House Ways and Means Committee. The bill stipulates that renewable diesel produced from imported feedstocks will not receive a production tax credit. If passed, this could eliminate credits for imported used cooking oil (UCO) and tallow, potentially boosting demand for domestic soybean oil. As a prominent player in the Food Products industry with an Altman Z-Score of 3.24 indicating strong financial health, ADM is well-positioned to benefit from these policy changes.

Gupta noted that preliminary reports suggest a significant increase in the Required Volume Obligation (RVO) for biobased diesel, potentially jumping from 3.35 billion gallons to 4.65 billion gallons. This revision, if finalized, would significantly increase the demand for soybean oil, benefiting Archer Daniels Midland’s crush and Renewable Identification Number (RIN) price optimization (RPO) margins.

The analyst expects the Agricultural (AG) services earnings for the company to begin rising in the second half of 2025. The animal nutrition segment is showing signs of recovery, and with further cost reductions, improvements in the human nutrition segment are also anticipated.

In terms of financial projections, UBS forecasts a compound annual growth rate (CAGR) of approximately 3.2% in dividend growth between 2026 and 2028. Free cash flow (FCF) after dividends is modeled to be $396 million, $715 million, and $785 million for 2026, 2027, and 2028, respectively. Gupta suggests that this financial position could allow for shareholder buybacks. InvestingPro data reveals ADM has raised its dividend for 50 consecutive years, currently offering a 4.07% yield. Get access to 8 additional exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports.

The analyst’s earnings per share (EPS) estimates for Archer Daniels Midland stand at 6.7% above consensus for 2027 and 15% above for 2028, indicating a strong confidence in the company’s financial performance in the coming years. Current EPS stands at $2.81 for the last twelve months, with analysts forecasting $4.02 for fiscal year 2025. For deeper insights into ADM’s valuation and growth potential, explore the full financial health analysis available on InvestingPro, which includes exclusive metrics and expert analysis.

In other recent news, Archer-Daniels-Midland (ADM) reported first-quarter earnings that exceeded Wall Street expectations, with an adjusted earnings per share (EPS) of $0.70, surpassing the forecast of $0.67. However, the company’s revenue fell short, coming in at $20.18 billion against an expected $21.63 billion. Despite the earnings beat, ADM has adjusted its full-year EPS guidance to the lower end of its previous range, now anticipating between $4.00 and $4.75. Analyst firms Jefferies and BofA Securities have both revised their outlook on ADM, with Jefferies cutting the stock price target to $44 and maintaining a Hold rating, while BofA downgraded the stock from Neutral to Underperform and lowered the price target to $45. Additionally, ADM announced a quarterly dividend of 51 cents per share, continuing its long-standing commitment to shareholder returns. The company also held its 2025 Annual Meeting of Stockholders, where shareholders approved executive compensation and re-elected board members. Despite these developments, ADM faces challenges in its Refined Products and Oilseeds and Crushing segments, with ongoing pressures impacting its guidance for the Ag Services & Oilseeds segment.

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