Monsanto (MON) Raises its Full-Year Guidance on Robust Sales

Agricultural products giant Monsanto (MON: Charts, News) surprised analysts this week by boosting its full year guidance. The company recently completed its seed selling seasons for North and South America. Robust sales in these regions gave Monsanto the confidence to increase 2012 earnings expectations from a range between $3.65 and $3.70 to a range between $3.73 and $3.78.

For the third quarter, Monsanto expects to earn an adjusted $1.69 to $1.74 per share, which includes a one-time tax adjustment. Monsanto CEO Hugh Grant expects the 25% growth in EPS to continue a positive feedback loop into 2013. Analysts expect Monsanto to earn as much as $4.11 per share in fiscal 2013. This reinforces the strong growth trend Monsanto has exhibited since fiscal 2011, when it posted 20% earnings growth. Analysts remain bullish on Monsanto, which has topped analysts' estimates over each of the past six quarters by an average of over 7 cents each time.

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Monsanto, a controversial company that has been criticized for its heavy lobbyist presence, proliferation of "Franken-foods" and heavy handed tactics against local farmers, is based in St. Louis, Missouri. Since being founded in 2000, the company's market cap has increased nearly sixfold. Monsanto's business, which has a strong presence in the United States and internationally, is divided into two primary segments - Seeds and Genomics and Agricultural Productivity. The former is the company's arm which creates regular and genetically modified seeds, while the latter creates agricultural, industrial, ornamental and turf applications, as well as various types of herbicides.

In April, Monsanto reported earnings of $2.28 per share on revenue of $4.7 billion. This topped analysts' earnings estimates by 16 cents and revenue estimates by $140 million. Much of Monsanto's strength was attributed to its chemistry portfolio, which includes its selective herbicide Roundup. Roundup is paired with Monsanto's own genetically modified seeds, which are resistant to Roundup. This highlights Monsanto's other core strength - its seeds-and-traits business - which many investors consider a long term play on a rising global population coupled with the decline of arable land. Monsanto's lawn-and-garden business also posted strong numbers.

Monsanto's corn business sales in Brazil exceeded expectations. Monsanto also performed well in the United States with strong corn and soybean sales. Looking forward, Grant expects 2012 acreage demand for its genetically modified Genuity reduced-refuge corn seeds to exceed its initial acreage expectations. Its soybean counterpart, Genuity Roundup Ready 2 Yield Soybeans, are expected to achieve the high end of its prior acreage estimates. Monsanto' core business in Eastern Europe also posted strong sales.

"This year has been important confirmation of the momentum in our business, as we've taken advantage of the strong global acres and agricultural environment and delivered on the key business drivers we set as priorities," Grant stated. Grant also noted that Monsanto was aggressively expanding into Latin American markets, boosting its presence in other emerging markets, and ensuring that it retains growth in the United States.

Due to Monsanto's strong growth potential, the company's trailing P/E of 20 is nearly double the industry average of 11.8. Its price to sales multiple of 3 is also more than triple the industry average of 0.8. The stock pays a quarterly dividend of 30 cents per share. The company has steadily increased its dividend since its market debut over a decade ago. Monsanto is scheduled to report its third quarter earnings on June 27. Although the stock is considered a conservative long-term investment, it is still heavily tied to the commodities markets, and may be adversely impacted by declining gas and metal prices.

Other News About MON

Monsanto boosts fiscal 2012 profit prediction Monsanto increases its full-year earnings guidance.
Monsanto raises full-year outlook on strong sales Strong seed and herbicide sales keep Monsanto healthy.

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Published on May 31, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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