Wednesday, May 27, 2009

Monsanto Profit to Come in Light

Seed company Monsanto was one of the few companies that appeared unscathed during the mess over the past 6 months. They were raising guidance when most were cutting. Today, we get news that earnings are going to come in on the low end of guidance, and lighter than analyst expectations.

  • Monsanto Co., the world’s biggest seed producer, said earnings this year will be at the low end of its previously announced forecast because of stronger-than- expected competition in its herbicide business.
  • Ongoing earnings will be about $4.40 a share, the lowest point of its forecasted range of $4.40 to $4.50, St. Louis-based Monsanto said today in a statement. The company was expected to earn $4.59 a share, the average estimate of 12 analysts in a Bloomberg survey.
  • Chief Executive Officer Hugh Grant is facing increased competition from Chinese makers of glyphosate herbicide that is cheaper than the company’s Roundup brand. Monsanto said it will earn $4.5 billion from seeds and genetic licenses, helping to reduce the effect of Roundup profit that will be $400 million less than the company’s $2.4 billion April forecast.
This isn't horrible news, but not great either. Its better to see the lack of profit from increased competition rather than poor demand. Monsanto is still in good shape, and this could be a nice opportunity to enter a position as the shares are off 4% this morning. Agriculture stocks as a whole have been strong lately, and are one of the few sectors that I believe are getting stronger right now.

Disclosure: No Position.