Archer-Daniels-Midland Company

ADM Details

Archer-Daniels-Midland Company (NYSE: ADM) is a global leader in human and animal nutrition and a leading agricultural origination and processing company. Agricultural commodities are originated and transported through the company's extensive worldwide asset base, which connects to markets in more than 200 countries. Corn, oilseeds, and wheat are also processed into goods for food, animal feed, chemicals, and energy.

Latest News:

• Inorganic Endeavors: ADM announced the acquisition of Flavor Infusion International, S.A. (FISA), a full-range provider of specialty ingredient solutions for customers in Latin America and the Caribbean, on December 22, 2021. With this acquisition, ADM acquires an experienced team of 60 employees who provide a comprehensive range of flavor ingredients and solutions to a growing list of food and beverage customers across Latin America and the Caribbean from two state-of-the-art manufacturing facilities in Panama and Colombia.

Q3FY21 Results:

• Substantial Progress in Revenues: Due to increased pricing of animal feeds, alcohol, biodiesel, meal, oils, corn, soybeans, and wheat, as well as larger volumes of grain and cotton, the company recorded an increase in revenues of 34.47% to USD 20.34 billion in Q3FY21 (ended September 30, 2021) from USD 15.13 billion in Q3FY20.
• Rise in Bottomline: ADM's net income increased from USD 225 million in Q3FY20 to USD 526 million in Q3FY21.
• Leveraged Balance Sheet: The company had USD 1.08 billion in cash and cash equivalents as of September 30, 2021, and total debt of USD 8.93 billion.

Key Risks:

• Product Concentration Risk: Soybean sales accounted for 18% of overall income in FY20. As a result, changes in the availability and prices of certain commodities due to weather, government policies and programs, global demand, or living standards may harm the company's operations.
• Energy Price Risk: Electricity, natural gas, and coal are used to power ADM's power plants, and their prices are highly variable and unpredictable. As a result, significant price increases for these products, particularly any costs related to greenhouse gas regulation or taxes, could negatively impact its bottom line.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ADM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ADM's stock price has risen 39.70% in the past twelve months and made a new 52 week high today. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 71.67. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 66.58.

Considering the uptick in the stock price, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 69.68, up 2.64%, as of January 04, 2022, at 10:54 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

 

PulteGroup, Inc.

PHM Details

PulteGroup, Inc. (NYSE: PHM) is a home builder based in the United States with operations in over 40 cities across 23 states. Homebuilding and Financial Services are the company's two operating segments. PHM sells single-family detached homes, townhouses, condominiums, and duplexes under the Centex, Pulte Homes, Del Webb, DiVosta Homes, John Wieland Homes, and Neighborhoods brands.

Latest News:

• Best Workplace: PHM was recognized as one of the Best Workplaces for Parents in 2021 on December 02, 2021. This is the company's first inclusion on Great Place to Work's renowned list, compiled by the global authority on workplace culture.

Q3FY21 Results:

• Expansion in Topline: Total revenue increased 17.74% to USD 3.48 billion in Q3FY21 (ended September 30, 2021) compared to USD 2.95 billion in Q3FY20, owing to an increase in house selling revenues.
• Boost in Net Income: In Q3FY21, net income climbed 14.21% to USD 475.55 million, compared to USD 416.40 million in Q3FY20.
• Decent Balance Sheet: The company had USD 1.57 billion in cash and cash equivalents as of September 30, 2021, and total debt of USD 2.54 billion.

Key Risks:

• Land Availability Risk: The ability of PHM to purchase property for the development of residential communities is critical to its operations. As a result, any downward trend in land availability, land sellers' willingness to sell their land at reasonable prices, financing, zoning, or other restrictions could jeopardize its operations.
• Competition Risk: PHM operates in a highly competitive housing market, with direct competition from several national, regional, and local home builders based on various characteristics such as location, price, quality, all of which could reduce sales volume or put pricing pressure on the company.

 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PHM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

PHM's share price has surged 22.39% in the past three months and is currently trading close to the higher-band of its 52-week range of USD 39.92 to USD 63.91. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 60.09. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 52.66.

Considering the uptick in the stock price, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 56.94, up 1.52%, as of January 04, 2022, at 9:36 AM ET.

 * The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

 

RenaissanceRe Holdings Ltd.

 

RNR Details

RenaissanceRe Holdings Ltd. (NYSE: RNR) is a global provider of insurance and reinsurance solutions and services. Property, casualty, specialty reinsurance, and other insurance products are among its product offerings supplied through its subsidiaries. Its operating segments are 1) Property; and 2) Casualty and Specialty.

Latest News:

• Quarterly Dividend and Share Repurchase Program: On November 11, 2021, the company declared a quarterly dividend of USD 0.36 per common share, paid on December 31, 2021, to shareholders of record on December 15, 2021. In addition, the RNR approved a renewed repurchase program to buy back common shares worth up to USD 500.0 million, including remaining balances under previous authorizations.

Q3FY21 Results:

• Growth in Topline: The company reported YoY growth of 15.94% in total revenues to USD 1.54 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.33 billion in Q3FY20. Net premiums earned, which accounted for 97.51% of the total revenue in Q3FY21, improved by 50.60% YoY.
• Decline in Bottomline: RNR reported a net loss of USD 450.22 million in Q3FY21 vs. a net income of USD 47.80 million in Q3FY20.
• Increase in Combined Ratio: In Q3FY21, the combined ratio (i.e., the sum of net claims, claim expense ratio and underwriting expense ratio) was 145.1%, up from 120.6% in Q3FY20, indicating that the company is paying out more money in claims than it receives in premiums.
• Share Repurchase: During 9MFY21, RNR repurchased 4,502,448 common shares at an average price of USD 156.46 per share, for a total consideration of USD 704.5 million.

Key Risks:

• Competition Risk: The company operates in a highly competitive reinsurance industry, where it competes directly with larger competitors who have more financial and operational resources. The intense competition had driven down market prices for many of its products in the past. If this pattern continues, it could harm the financials of the company.
• Broker Concentration Risk: The majority of RNR's revenue comes from a small number of insurance and reinsurance brokers. Therefore, the loss of brokers through mergers or other consolidation could harm its financials.

Valuation Methodology: Price/Book Value Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

RNR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

RNR's stock price has increased 20.60% in the past three months and is currently leaning towards the higher band of its 52-week range of USD 137.66 to USD 175.12. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 56.82. We have valued the stock using the Price/Book Value multiple-based relative valuation methodology and arrived at a target price of USD 152.39.

Considering the uptick in the stock price, technical indicators, and current valuation, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 168.615, up 0.66%, as of January 04, 2022, 9:42 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.