Premium agricultural chemicals company Monsanto CompanyMON is scheduled to report fourth-quarter fiscal 2015 results before the opening bell on Oct 7, 2015. In the last four quarters, the company has generated a positive average surprise of 10.08%, beating the estimates in two out of four occasions. Let's see how things are shaping up prior to this announcement.
Factors to Influence Q4 Results
Monsanto's products continue to enjoy high demand as farmers always seek to maximize their crop yield. Backed by innovative products like Intacta, Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybean, the company expects to witness higher revenues in the to-be-reported quarter. However, short-term market headwinds might hurt the company's performance. Also, unfavorable currency movements and cyclical downswings in the agricultural industry might adversely impact the company's results in the quarter under review.
Taking into account the current market scenario, Monsanto expects to break even in fourth-quarter fiscal 2015. Maintaining its EPS guidance for fiscal 2015, the company expects earnings to trend the lower end of the $5.75-$6.00 range. Original free cash flow too is projected to scale the lower end of the $2.0-$2.2 billion range. In order to combat business issues such as reducing acres and currency headwinds, Monsanto aims to lower its operational expenses by $300-$500 million within 2017, aided by tactical cost-saving programs.
Our proven model does not conclusively state that Monsanto is likely to beat earnings in the quarter under review. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. That is not the case here as we will see below.
Zacks ESP: Monsanto's Earnings ESP is 0.00%.
Zacks Rank: Monsanto's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Stocks to Consider
Here are some stocks you may want to consider, as our model shows these have the right combination of elements to post an earnings beat:
Agnico Eagle Mines Limited AEM , with an Earnings ESP of +25.00% and a Zacks Rank #3.
FMC Corp. FMC , with an Earnings ESP of +12.12% and a Zacks Rank #3.
Orion Engineered Carbons SA OEC , with an Earnings ESP of +14.29% and a Zacks Rank #3.