Earnings Preview : Monsanto (NYSE: MON), Q3, 2010
Wednesday, June 23, 2010 3:26 PM

Chemical and agriculture product manufacturer Monsanto (NYSE: MON) is scheduled to release the company's 2010 3rd quarter financial results on June 30 before the market open. A conference call will be held by company management at 9:30 AM eastern time to discuss the results.

The consensus estimate for the quarterly earnings is $0.80 per share on revenues of $3.17 billion. For the 3rd quarter of 2009, Monsanto earned $1.25 on $3.16 billion of sales. The per share earnings estimates from the 15 analysts following MON range from $0.75 to $0.80 per share.

Three months ago, the earnings forecast for Monsanto was $$1.58 per share, indicating a 25% earnings growth rate over the same quarter in 2009. A month later, the estimate had dropped to $1.35 per share and in late May, Monsanto dropped a bomb, reducing the company's own estimates for the quarter and 2nd half of 2010.

During the 2nd quarter earnings release in April, Monsanto confirmed a 2010 earnings window of $3.10 to $3.30 per share. On May 27, Monsanto issued revised estimates, downgrading the earnings per share for the year to a range of $2.40 to $2.60 and the third quarter results to $0.75¢ to $0.80. Fast moving Wall Street analysts soon adjusted their estimates to match the numbers put out by Monsanto management.

The press release noted a fundamental change in the market for glyphosate products and that Chinese generic weed killers were seriously affecting the sales of Monsanto's flagship Roundup products. Monsanto has responded by reducing the prices of Roundup products and putting together easy to use weed control packages for farmers. The pricing changes should help Monsanto win back market share going forward, but it will also squeeze the company's gross profit margins.

The press release announcing the reduction in 3rd quarter earnings did not materially affect the stock price. MON shares had been declining steadily before the announcement and they have leveled off in the $50 range since that time. In early June, Goldman Sachs analyst Robert Koort upgraded MON to a Buy rating with a price forecast of $65. The upgrade was based on Mr. Koort's belief that Monsanto would be able to return to a path of earnings growth and an expansion of the P/E ratio in 2011,

The results for the 3rd quarter earnings should hold little in the way of any surprises for investors. Wall Street will be looking for indications that new crop seed products are providing growth and that the Roundup price cuts are having the desired effect. The Monsanto board has also authorized a $1 billion share buyback commencing on July 1. The earnings results for the past 3rd quarter are less important that the projections for the company into the winter of 2010 and through 2011.



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