The Zacks Analyst Blog Highlights: Archer Daniels Midland Company, Incyte Corporation, Eli Lilly and Company, Pfizer and Novartis

Aug 02, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Aug. 2, 2011 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Archer Daniels Midland Company (NYSE: ADM), Incyte Corporation (Nasdaq: INCY), Eli Lilly and Company (NYSE: LLY), Pfizer (NYSE: PFE) and Novartis (NYSE: NVS).


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Here are highlights from Monday's Analyst Blog:

Earnings Preview: ADM

Archer Daniels Midland Company (NYSE: ADM), one of the leading food processing companies in the world, is scheduled to report its fourth-quarter 2011 financial results before the opening bell on August 2, 2011.

The current Zacks Consensus Estimates for the quarter is earnings of 84 cents a share. For the quarter under review, revenue is expected at $20,484.0 million, according to the Zacks Consensus Estimate.

Third-Quarter 2011 Summary

Archer Daniels reported robust third-quarter 2011 results. Net income for the reported quarter was $578.0 million or 86 cents per share compared with $421.0 million or 65 cents per share in the year-ago quarter. Quarterly earnings also outpaced the Zacks Consensus Estimate by a penny.

The robust quarterly result was primarily attributable to increased segmental profit, partially offset by negative discrepancy from changes in Last-In-First-Out (LIFO) inventory valuations caused by higher agricultural commodity prices.

ADM's quarterly net sales climbed 32.6% year over year to $20,077.0 million, beating the Zacks Consensus Estimate of $17,279.0 million. The growth in net sales was mainly attributable to a robust jump of 37.6% in Agricultural Services to $9,340.0 million, a rise of 30.6% in Oilseeds Processing revenues to $6,642.0 million and an increase of 28.2% in Corn Processing revenues to $2,513.0 million.

Fourth-Quarter 2011 Zacks Consensus

The analyst covered by Zacks expects Archer Daniels Midland to post fourth-quarter 2011 earnings of 84 cents a share, which is higher than earnings of 69 cents delivered in the prior-year quarter. The current Zacks Consensus Estimate ranges between earnings of 74 cents and $1.00 a share.

Zacks Agreement & Magnitude

Of the 12 analysts following the stock, only one analyst revisited and downgraded its estimate, over the last 7 days for the fourth quarter of fiscal 2011. Two out of 3 analysts revisiting their estimates have downgraded and only one has upgraded it over the last 30 days.

Our View

Archer Daniels Midland is in the midst of a brisk expansion strategy, which includes expanding crushing capacities in North America, and fertilizer blending and biodiesel capacities in South America. Moreover, in Europe, the company has acquired processing facilities in Czech Republic and Germany.

These initiatives offer a strong upside potential to the company. Moreover, the world is facing tight supply of milling-quality wheat resulting from continued reductions in the production of Australian wheat crop and depletion in supply from Europe.

The U.S. is becoming the best source for milling quality wheat due to a variety of buyers in North Africa and Middle East. ADM is expected to benefit from this as it has a substantial quantity of milling wheat in storage.

Incyte Does Not Excite

Incyte Corporation's (Nasdaq: INCY) second quarter 2011 loss of $0.41 per share was wider than the Zacks Consensus Estimate by $0.05. The wider loss suffered in the reported quarter was attributable to lower revenues and higher operating expenses. The company earned $0.02 per share in the corresponding period of 2010.

Total revenues in the reported quarter declined to $16.8 million versus $49.8 million recorded a year-ago. The year-ago revenues were boosted by the recognition of $33.0 million as milestone payments received from partners Eli Lilly and Company (NYSE: LLY) and Pfizer (NYSE: PFE). Revenues in the second quarter of 2011 fell short of the Zacks Consensus Estimate of $20 million.

Total cost and expenses in the reported quarter climbed 60.0% to $57.9 million. Both R&D expenses (up 59.9%) and SG&A expenses (up 58.4%) were on the upswing during the quarter. Incyte's efforts to develop its pipeline contributed to the rise in R&D expenses. The jump in SG&A expenses was attributable to the expenses incurred by the company for INCB18424 (also known as INC424).

The candidate is being developed to treat patients suffering from myelofibrosis (MF), a rare bone marrow disorder. Incyte submitted a new drug application (NDA) to the US Food and Drug Administration (FDA) seeking marketing approval for the MF candidate in June 2011.

Approval has been sought on the basis of encouraging data from two late-stage studies - COMFORT (COntrolled MyeloFibrosis Study with ORal JAK Inhibitor Therapy) - I (US trial) and COMFORT-II (European portion of the study).

While Incyte was responsible for the COMFORT-I study, COMFORT-II was conducted by partner Novartis (NYSE: NVS). Management expects a decision from the FDA regarding INCB18424 by year-end. Novartis is seeking approval of the candidate in the European Union.

2011 Outlook

Incyte maintained its outlook for R&D and SG&A expenses. R&D expenses for 2011 are expected in the range of $175 million - $185 million.  SG&A expenses are expected in the range of $50 million-$55 million in 2011. Incyte also projects 2011 cash usage in the range of $185 million-$200 million.

Our Recommendation

Currently, we have a Neutral stance on Incyte in the long run. The company carries a Zacks #3 Rank (Hold rating) in the short run.

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