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Monsanto Upgraded to Hold on Innovations & Market Tailwinds - Analyst Blog

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On Apr 14, 2015, Zacks Investment Research upgraded Monsanto CompanyMON to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell) primarily on account of its business innovations and strong growth initiatives. Going by the Zacks model, companies holding a Zacks Rank #3 have chances of performing in line with the broader market.

Why the Upgrade?

In the contemporary era of food price inflation and ever-expanding population, farmers are continually concerned about increasing the crop yield. At such a juncture, demand for Monsanto's products, which serve to increase crop productivity, is considerably increasing over time. The company enjoys a high brand status in the global modified seeds' market. Backed by superior technological knowledge, Monsanto provides non-imitable modern agro products like modified seed traits for enhancing crop yield.

Furthermore, being an energy-intensive stock, Monsanto's marketing expenses are declining due to lower oil prices in the global energy market. The company is strategically utilizing its liquidity to fund lucrative growth plans which would enhance its top-and bottom-line figures, going forward. For instance, through greater commercialization of its new Roundup Ready 2 Xtend soybeans, Monsanto aims to fortify its current soybean-based growth strategy. Also, in order to support the soybean, cotton and corn farmers with the Roundup Ready PLUS Crop Management solutions, the company recently extended its business relations with FMC Agricultural Solutions.

Supported by these improvement initiatives, the company aims to double its earnings per share growth by 2019. We believe Monsanto's firm commitment toward increasing its shareholders' value will retain investors' confidence in the stock to some extent. Furthermore, benefits reaped from success of growth plans as well as product or process-based innovations are expected to offset the negative impact of headwinds in the near term.

Stocks to Consider

Better-ranked stocks in the industry include Asanko Gold Inc. AKG , Anglo American Platinum Limited AGPPY and Accretive Health, Inc. ACHI . All three stocks hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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