Monsanto Co. (NYSE: MON), the world's biggest seed company, is scheduled to release financial results for the fiscal second quarter 2010 before the opening bell on Wednesday, April 7, 2010. Analysts, on average, expect the company to report earnings of $1.78 per share on revenue of $3.94 billion. In the year ago quarter, the company posted earnings of $2.16 per share on revenue of $4.04 billion.Monsanto Company provides agricultural products for farmers in the United States and internationally. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. Monsanto has been named "2009 Company of the Year" by Forbes Magazine. In its fiscal 2009 Monsanto sold $7.3 billion of seeds and seed genes, versus $4 billion for second-place DuPont ( NYSE: DD) and its Pioneer Hi-Bred unit. Monsanto netted $2.1 billion on revenue of $11.7 billion for fiscal 2009 (ended Aug. 31). Its sales have increased at an annualized 18% clip over five years; its annualized return on capital in the period has been 12%. The company operates in two segments - Seeds and Genomic.
In the preceding fiscal second quarter, the St. Louis, Missouri-based Monsanto reported that its first-quarter net loss attributable to Company was $19 million, compared to net income of $556 million in the same quarter last year. On a per share basis, net loss was $0.03, compared to net income of $1.00 in the year-ago quarter. Quarterly revenue dropped 36% to $1.697 billion from $2.649 billion in the prior-year quarter. Analysts, on average, expected the company to report breakeven per share on revenue of $1.98 billion.
Last month, the agricultural products giant affirmed its earnings outlook for fiscal 2010. Monsanto continues to expect full-year 2010 earnings per share on reported basis in the range of $2.85 to $3.11. This outlook includes restructuring charges of $0.19 per share to $0.25 per share. Excluding this charge, Monsanto continues to expect fiscal 2010 ongoing earnings per share of $3.10 to $3.30.
According to company, it currently expects that about 50% of the full-year earnings guidance will be realized in the second quarter, reflecting potential timing shifts into the company's second half. This is related to the effect of the late 2009 harvest on soybean shipments, increasing contribution from international corn into the company's overall earnings mix and a return to historic seasonality in the earnings of the Roundup and other agricultural herbicides business.
The company is launching two game-changing new products, resetting its Roundup herbicide business, and implementing a restructuring plan to solidify operational leverage to create the right platform for growth going forward. Speaking at a conference, CFO Carl Casale said "If we achieve these three things, then this year will be a success in providing firm footing for our path to 2012. We're not playing for 2010 alone, but we recognize that the work we do in 2010 sets up the opportunity through 2012."
According to Casale, the company knew 2010 would be the toughest year in its plan, but it is committed to establishing a successful platform for the remainder of the plan. "This year has seen two of the largest product launches in our history on top of a significant restructuring, and I remain confident that we will learn and adjust and build on the momentum over the next two years," Casale stated.
Looking beyond 2012, Monsanto estimates that its R&D pipeline can deliver more than $8 billion in gross sales at the farmgate through biotechnology and breeding in 2020, with upside opportunity through product and geographic expansions. Monsanto has said new soybean seeds, led by Roundup Ready 2, will add $425 million to gross profit by 2012, and new corn seeds, led by SmartStax, will add $2 billion to profit.SmartStax allows farmers to cut their pest refuge, the zone in fields planted with corn not genetically programmed to kill pests, from 20 percent to 5 percent. Chief Executive Officer Hugh Grant is counting on the two new varieties to help boost seed earnings to as much as $7.5 billion in 2012 from $4.5 billion in 2009.
However, Casale recently revealed that the Roundup Ready 2 Yield soybeans may fall 20 percent short of the bottom of the company’s forecast of 8 million to 10 million planted acres. SmartStax corn seed may miss the St. Louis-based company’s 4 million-acre target by a similar percentage. The shortfall will reduce earnings less than 5 cents a share this year and won’t hurt long-term goals, Casale said. Farmers are trying the new products in the numbers expected, only on fewer acres, he said.
The company is creating a separate division for its struggling herbicide business to help stabilize and "better align spending and working capital needs" around the unit, which has been hurt by increased competition and price pressure. Monsanto officials said future gross profits from the Roundup herbicide business would drop by half to about $1 billion annually by 2012 from $2 billion in 2009 as the company grapples with increased competition in the sector. Roundup, once the flagship of Monsanto's agricultural chemicals business, in the future should amount to less than 15 percent of the company's total gross profit.
The company's stock currently trades at a forward P/E (fye 31-Aug-11) of 16.15 and PEG Ratio (5 yr expected)of 1.48. In terms of stock performance, Monsanto are down over 12% over the past year.
Full Disclosure: None.
