On Jul 4, we reiterated our Neutral recommendation on the
agricultural chemicals company,
). The results of the company surpassed its year-ago performance.
However, at the same time, its international presence exposes it
to geo-political and financial risks.
Why the Reiteration?
Monsanto's earnings in the fiscal third quarter of 2013 were
$1.66 per share increasing 1.8% year over year on the back of
improved revenues and margins. Revenues for the quarter increased
0.7% year over year to $4.2 billion, driven by an improvement in
its global corn business.
Based on the results, management maintained its outlook for
fiscal 2013, with earnings in the range of $4.50 - $4.55,
indicating year-over-year growth of 20%. This rising business of
the company is expected to continue in fiscal 2014 as well, with
an expected rise in the corn seed portfolio pricing in fiscal
2014. The improved seed business in the United States also
strengthens this belief.
Monsanto's attempts to increase shareholders' value also seem
promising as it announced a $2 billion share repurchase plan
The company's presence in countries outside the United States
exposes it to various risks such as foreign currency fluctuation,
economic and socio-political risks, making it difficult for the
company to operate smoothly.
For a company like Monsanto, an enormous amount is spent
toward research and development. Such expenses may prove to be
futile if government permits are not received in time.
Moreover, Monsanto's business in Brazil still remains vague,
leading to the possibility of a lower demand in the coming
quarters as well. Moreover, the increased societal/government
resistance to genetically modified crops and farmers' reluctance
to accept new products remain the major offsetting factors.
Other Stocks to Consider
Monsanto currently carries a Zacks Rank #3 (Hold). Some other
companies in the sector which are performing well and carry a
favorable Zacks Rank include
). All the companies carry a Zacks Rank #2 (Buy).
FMC CORP (FMC): Free Stock Analysis Report
GEVO INC (GEVO): Free Stock Analysis Report
LIMONEIRA CO (LMNR): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
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