In a new research report out today, Goldman Sachs is removing
Monsanto Co (
) from its Conviction Buy List after the company reported weaker
than expected Q4 earnings and provided below-consensus FY14 EPS
guidance in addition to a $930 million acquisition expected to
reduce earnings by around $0.14 per share during the next fiscal
Goldman said it was lowering its FY14 earnings estimates and
also cut its 12- month price target by $14 to $110 a share, which
equates to a 21.5x multiple. That said, the analyst is maintaining
his Buy rating for the stock as well as his view MON is set up for
a 15% to 20% jump in FY14 earnings.
Moreover, it is worth noting the company's acquisition of The
Climate Corp is still in the early innings of its growth trajectory
and is also seen supplementing MON core Seeds and Traits
The next likely catalyst for shares is the company's Investor
Day in November, where analysts will key in on the proposed Climate
Corp acquisition and its path to profitability. Analysts also will
be examining the scale of the opportunity, according to
As a recap from yesterday's MT Newswires, MON reported a Q4
operating loss of $0.47 per share, trailing consensus estimates by
$0.06 per share.
The delta came from lower gross profits in the company's
Soybean, Cotton and Vegetable segment, offset partially by strength
in Agricultural Productivity. Total gross profit of $924 million
rose 5% year over year, but still trailed Street expectations.
Separately, MON announced the acquisition of The Climate Corp
for $930 million in cash in an effort to advance its Integrated
Farming Systems platform.
According to the company, the acquisition will reduce 2014 EPS
by around $0.14 per share with the start-up company not yet
profitable. Its revenue base also is still small, with The Climate
Corp in the early stages of a roll out.
On the call, investor Q&A largely focused on the
acquisition. According to management, the acquisition will be
"applicable immediately" (side bar: that does not equate to
immediately accretive, as evidenced by dilution from the deal) with
the deal not expected to become accretive for at least another two
years (or until at least FY15).
MON issued initial FY2014 EPS guidance of $5.00-$5.20 (including
$0.14 of acquisition dilution), which compares to consensus of
$5.33 although the street's number does not include the
acquisition. On the call, management also noted that Q1 2014 EPS
would be "in the same EPS range to slightly up from 1Q13."
The company is trading at 20x earnings, in line with its median
multiple, but at a premium to competitors Dow Chemical Company (
) at 14x, E.l. du Pont de Nemours (
) at 14x, Bayer AG (
), and Syngenta Ag (
) at 16x, respectively.
MON 103.77 -0.27 -0.26
DOW 38.60 -0.10 -0.26
DD 58.29 -0.71 -1.20
BAYRY 117.99 +0.33 +0.28
SYT 80.30 -0.09 -0.11
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