“With improving market conditions and a large U.S. harvest, combined with the team’s solid execution capabilities, we feel good about the remainder of the year and a stronger 2017.”

I am really glad to read it. Results for Q3 were above expectations, but keep in mind that on adjusted basis they are still weaker y/y. Business momentum is positively changing, which is reflected in share price, but I hope that quarters with good y/y dynamics are still ahead of us.


During the first nine months of 2016, the company returned $1.3 billion to shareholders through dividends and share repurchases.

Well, having market cap of $27b gives us 4.8%, so assuming proportionality over 12 months gives us around 6.5%. Decent result, but keep in mind, that net debt is growing. Only for the last year it is $0.5b. It is not the case that company is returning 6.5% and moreover keeps some cash, but some of this is from issuance of debt (which for 2.5% till 2026 is not a bad news…). On the other hand one can say that company is doing M&A from debt, which is EPS accretive. Anyway, debt is going up.

ROIC objective was not achieved in last quarter, but trend is changing/flattening.


From historical perspective there is still space to increase profitability.


Let’s look on valuation (on next year consensus):


P/E = 16

Dividend yield + buyback ~6% (as stated above).


Well, valuation is not low. Comparing to other companies I would say neutral, but it would be hard for me to buy shares now. Also share price is almost at all-time highs (still in long term there should be new highs). On the other hand business momentum should still be good at 2017…


Summing up, business momentum should be good in the following quarters, but as share price went up significantly valuation is currently not occasional (in my opinion). Maybe at price above $50 I will take profit and reinvest money in other dividend ideas. On the other hand there are many companies with valuation at EV/EBITDA ~13 so there is potential for multiple expansion.


Disclosure – long ADM