ADM – Market expectations are for record-high Uniform ROA, but management’s concerns about ROIC growth and their savings targets imply this may be unwarranted

• Archer-Daniels-Midland Company (ADM:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Assets, with a 1.0x Uniform P/B, implying somewhat bullish expectations for the firm. However, given management’s concerns about profitability, this may be unwarranted
• Specifically, management appears concerned about the sustainability of ROIC growth, and may lack confidence in their ability to achieve their run-rate savings targets for 2017 and 2018, as well as their ability to meet operating cash flow expectations. Should the firm fail to drive Uniform ROA to record-highs, as management sentiment suggests, multiple compression and equity downside would be warranted