ADM's Paradox: Earnings Surprise Can't Offset Hurt in Segment Sales and Margins

Archer Daniels Midland Company (ADM) reported fourth-quarter 2025 results that illustrate a classic earnings paradox: while bottom-line profitability beat expectations, the company’s core business segments hurt by falling revenues and deteriorating margins. The mixed signals paint a picture of a global agribusiness giant navigating turbulent market conditions, where pockets of strength cannot fully compensate for pronounced weakness elsewhere.

Profitability Rises, But Revenue Plunges Amid Market Headwinds

The earnings story at first appears encouraging. ADM’s adjusted earnings of 87 cents per share exceeded the Zacks Consensus Estimate of 83 cents, providing a narrow beat on the bottom line. However, this silver lining obscures a darker reality. Reported earnings of 94 cents per share declined sharply from $1.17 in the year-ago quarter, while adjusted earnings of $1.14 in the prior year underscore the magnitude of year-over-year deterioration.

The revenue picture is far more troubling. Top-line sales of $18.6 billion fell 13.7% from the prior year and significantly undershot the consensus estimate of $22.3 billion. Gross profit contracted 10.7% to $1.2 billion, with gross margins compressing to just 6.5%. These data points, while stark in isolation, become even more concerning when examined through the lens of segment performance.

Where Crushing Margins Hurt ADM’s Agribusiness Division Most

The Ag Services & Oilseeds segment, ADM’s largest division by revenue, experienced the most pronounced hurt during the quarter. Total segment revenues dropped 16.9% year over year to $14 billion, falling well short of the Zacks consensus estimate of $17.7 billion. More alarming was the deterioration in operating profitability: adjusted operating profit plummeted 31% to $444 million.

Within this segment, the Ag Services subsegment saw operating profit decline 31%, driven primarily by lower soybean export activity from North America and mark-to-market headwinds. The quarter reflected only $1 million in net positive mark-to-market impacts, a sharp reversal from $50 million in gains during the prior-year period. The Crushing subsegment, however, experienced even more severe pressure. Operating profit in this division plunged 69% as weaker crush margins in both North and South America overwhelmed gains from higher global crush volumes.

The margin compression was particularly acute due to mark-to-market losses totaling approximately $20 million during the quarter, compared with a neutral position in the prior-year period. Refined Products and Other operations declined modestly by 2%, constrained by lower refining margins amid weaker food demand and softer fuel demand. These headwinds were partially offset by uncertainty surrounding U.S. biofuel policy clarity, which has created a fog of uncertainty around future margin trajectories.

A bright spot emerged from ADM’s investment in Wilmar, where equity earnings surged roughly 49% year over year, suggesting that international agricultural operations remain resilient.

Sugar & Starch Stumbles While Corn Processing Surges

The Carbohydrate Solutions segment posted operating profit of $299 million in Q4 2025, reflecting a modest 6% decline from the year-ago period. However, performance within this segment was highly uneven. The Starches & Sweeteners subsegment deteriorated 16%, pressured by lower global demand that squeezed both volumes and pricing power. The division also faced elevated corn costs in EMEA stemming from corn quality issues, adding another layer of profitability pressure.

The comparison was further complicated by the absence of significant insurance proceeds. The prior-year quarter benefited from $37 million in insurance claims related to the Decatur East and West incidents, whereas the current quarter captured only $4 million related to the Decatur West claim. This $33 million swing in insurance proceeds created a difficult year-over-year comparison.

Vantage Corn Processors provided the contrasting narrative, with operating profit surging 187% year over year. Strong ethanol industry margins during October and November, coupled with robust export demand that trimmed industry inventories, drove this exceptional performance. The typical seasonal decline in December did dampen results somewhat, but the overall quarter demonstrated the resilience of ethanol operations when market conditions align favorably.

Nutrition Segment Faces Recovery Challenges

The Nutrition segment reported operating profit of $78 million in the fourth quarter of 2025, marking an 11% year-over-year decline. This segment’s struggles stem largely from the absence of insurance proceeds that benefited the prior-year quarter. Within Human Nutrition, operating profit fell 10%, though Flavors demonstrated strength with robust sales in North America complemented by gains from Europe and Asia Pacific. Specialty Ingredients continued its gradual recovery, while Health & Wellness operations posted lower results due to strategic actions aimed at normalizing inventory and optimizing cash flow.

Animal Nutrition presented additional challenges, with operating profit declining 15% year over year, primarily reflecting localized volume softness and the impact of one-time items.

Balance Sheet Strength Anchors 2026 Guidance

Despite operational headwinds, ADM maintains a fortress-like balance sheet. The company ended the quarter with cash and cash equivalents of $1.02 billion and total shareholders’ equity of $34.7 billion against long-term debt of $7.6 billion. Operating cash flow generation remained solid at $5.45 billion for the full year, while dividend payments totaled $987 million during 2025.

Management demonstrated confidence through capital allocation decisions. The board declared a quarterly cash dividend of 52 cents per share, up 2% from 51 cents per share previously, marking the 94th consecutive year of uninterrupted dividend payouts. This decision underscores management’s conviction in the company’s ability to weather current turbulence.

For 2026, ADM projects adjusted earnings per share in the range of $3.60 to $4.25. The lower end of this guidance assumes continued deferrals in U.S. biofuel policy clarity and flat crush margins, while the upper end incorporates assumptions of sustained crush margin expansion, progress on manufacturing efficiency initiatives, and strengthening customer demand. Segment-specific outlooks expect year-over-year operating profit growth in Ag Services & Oilseeds supported by improving global trade flows, flat operating profit in Carbohydrate Solutions as reduced starch and sweetener volumes are offset by higher ethanol margins, and continued organic growth acceleration in Nutrition.

Capital expenditures for 2026 are projected between $1.3 billion and $1.5 billion, reflecting ongoing investment in strategic priorities and operational efficiency enhancements.

What Investors Need to Know

The fundamental tension in ADM’s current state revolves around this reality: near-term margin pressures and revenue contractions hurt the company’s growth narrative, yet management’s balanced capital allocation and solid balance sheet position the company to navigate extended weakness. Shares have gained 13.2% over the past three months relative to the broader industry’s 14.8% appreciation, suggesting that investors have partially priced in near-term challenges while maintaining modest conviction in the company’s ability to capitalize on eventual margin recovery.

For investors seeking companies demonstrating stronger near-term momentum, comparisons within the food and agriculture space reveal interesting alternatives. Mama’s Creations, Inc. (MAMA), which manufactures fresh deli-prepared foods, carries a Zacks Rank of 1 (Strong Buy) with a trailing four-quarter earnings surprise averaging 133.3%, while consensus estimates project 39.9% sales growth and 44.4% earnings growth for the current fiscal year. The Hershey Company (HSY), a global confectionery leader with Zacks Rank 2 (Buy) status, has delivered an average earnings surprise of 15%, with consensus expecting 3.6% fiscal-year sales growth. J&J Snack Foods Corp. (JJSF), another Zacks Rank 2 holding, has generated consecutive quarters of positive earnings surprises, with current-year consensus estimates pointing to 1.7% sales growth and 4.5% earnings growth.

ADM’s journey through 2026 will hinge on whether management can navigate policy uncertainty, stabilize crush margins, and execute on efficiency initiatives. Until those conditions materialize, investors should view the current valuation through a cautious lens, recognizing both the franchise strength and the genuine near-term headwinds that hurt profitability across key business segments.