Agribusiness giant ADM is one of the young ethanol industry's biggest players. Prudential analyst John M. McMillin said falling prices for ethanol pushed him to cut his earnings estimate for the fiscal year ended June 2008 to a profit $2.75 per share, down from $3.25 per share.
Wall Street overall is looking for $2.97 per share, according to an analyst poll by Thomson Financial. He kept his 2007 estimate at $2.55 per share, compared with the Street's overall view of $2.52.
The analyst also reduced his target price to $45 from $49 for the company in a research note. He reiterated his "Overweight" rating, saying the company could look to purchase some of its ethanol competitors or try to distribute their production.
McMillin said he thinks Archer-Daniels-Midland has already locked in favorable prices of $2.30 per gallon for much of its ethanol production for fiscal 2007. But he sees prices falling back to $1.85 per gallon for the following fiscal year.
Hurting ethanol companies is an increasing amount of supply and falling crude oil prices. A barrel of crude dropped 15 cents to $60.40 on the New York Mercantile Exchange, after earlier dipping as low as $59.52. Falling crude prices makes alternative fuel less attractive to customers.
Archer-Daniels-Midland shares tumbled $1.38, or 3.6 percent, to $37.10 on the New York Stock Exchange.
Among other ethanol producers, Aventine Renewable Energy Holdings Inc. fell 52 cents, or 2.6 percent, to $19.73 on the NYSE.
MGP Ingredients Inc. lost $1.38, or 5.9 percent, to $22, and Pacific Ethanol Inc. gave up $1.07, or 7.3 percent, to $13.64, both on the Nasdaq.
VeraSun Energy Corp. slipped 73 cents, or 4.4 percent, to $15.87 on the NYSE.
