We are maintaining our Neutral recommendation on
Monsanto Company
(
MON
).
We remain concerned regarding the rising cost of production,
resulting from a competitive business environment with numerous
agrichemical and seed marketers.
To survive such a competitive environment, Monsanto focuses on
research and developmental activities which involve huge
investments, governmental permits and massive amounts of time.
However, there are positive flipsides for such R&D investments
as well.
The R&D lineups in molecular-bred hybrid technologies as
well as technical collaboration with agri-business research firms
continue to support sustainability and modernization in cropping
patterns for long-term growth.
Over the last few quarters, the company has witnessed upside in
volume and mix benefit within the Seeds and Genomics segment,
especially in corn traits. Monsanto successfully increased their
yields, while reducing the use of key resources. Such
cost-effective business holds optimism for the years ahead.
Anxiety remains with Monsanto's widespread global business,
which exposes it to foreign currency fluctuations, changes in local
political or economic conditions, pricing directives, as well as
import and trade restrictions. The company strives to manage
commodity price fluctuations through future contracts and other
hedging mechanisms.
To ensure supply of raw materials even in an erratic seed
demand-supply environment, the company enters into contracts with
third parties on favorable terms. Moreover, the company's third
party dependence on seeds supply is anticipated to raise
operational uncertainty.
The company holds a competitive edge above the other industry
players including
Syngenta AG
(
SYT
) and
BASF SE
(
BASFY
). Monsanto currently has a Zacks #2 Rank, which translates into a
short-term Buy rating (1-3 months).
BASF SE (BASFY): Free Stock Analysis Report
MONSANTO CO-NEW (MON): Free Stock Analysis
Report
SYNGENTA AG-ADR (SYT): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research