) reported disappointing results for the third quarter of fiscal
2014 (ended May 31, 2014). The company recorded earnings per share
from continuing operations of $1.62, beating the Zacks Consensus
Estimate of $1.55 by 4.5%. However, reported earnings were below
the year-ago figure of $1.66 per share.
Third-quarter revenues of $4.250.0 million fell short of the Zacks
Consensus Estimate of $4,368.0 million. However, revenues were
roughly flat year over year.
On a segmental basis, revenues from Seeds and Genomics edged
down 0.5% year over year to $3.0 billion. Revenues from
Agricultural Productivity increased 1.3% year over year to $1.2
Cost & Margins:
Monsanto's gross profit margin was 55% compared with 53% recorded
in the prior-year quarter. Operating expenses were recorded at
$1,082.0 million, higher than $1,024.0 million in the year-ago
Selling, general and administrative, and research and
development expenses, as a percentage of net sales, were recorded
at 15.0% and 10.0%, respectively.
Balance Sheet/Cash Flow:
Exiting fiscal third-quarter 2014, Monsanto's cash and cash
equivalents were approximately $1.9 billion compared with $3.8
billion at the end of fiscal second-quarter 2014. Long-term debt
was roughly flat with the prior quarter at $3.0 billion.
In the nine months ending May 2014, cash flow from operations
was $371.0 million, down considerably from $786.0 million in the
year-ago quarter. Total capital spending was roughly $688.0 million
as against $459.0 million spent in the nine months ended May
With approximately $1.1 billion remaining in the company's
current share repurchase program, the company announced a new
two-year $10 billion share repurchase authorization. This includes
the authorization for an accelerated share repurchase program worth
Seeds and Genomics segment sales are expected to grow in the coming
quarter, leading to a rise in margins as well as earnings.
Moreover, the company intends to benefit from its Climate
acquisition. Based on this, management anticipates earnings per
share for fiscal 2014 toward the higher end of the $5.10 to $5.20
range. On an as-reported basis, the company expects to earn $5.12
to $5.22 per share, up from the previous range of $5.02-$5.22.
However, the company continues to foresee headwinds of 15 to
20 cents from foreign currency impacts.
Management also raised its free cash flow expectation to the
range of $700.0 million to $800.0 million from the earlier
projection of $600.0 million to $800.0 million. Cash flow from
operating activities is anticipated in the range of $2.9 billion to
$3.3 billion. Moreover, cash required for investing activities are
expected to be within $2.2 billion and $2.5 billion.
Additionally, the company intends to double its ongoing earnings
per share by fiscal 2019, driven by growth in the corn seeds and
traits business. Monsanto also plans to realign its net debt to
EBITDA (earnings before interest, taxes, depreciation and
amortization) ratio to 1.5 by the end of fiscal 2015.
Monsanto currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the industry include
Gruma S.A.B. de CV
Wilmar International Limited
). While Gruma S.A.B. sports a Zacks Rank #1 (Strong Buy),
Limoneira and Wilmar International have a Zacks Rank #2 (Buy).
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