Earnings Preview : Monsanto Co. (NYSE: MON): Third Quarter 2010
Tuesday, September 21, 2010 4:29 PM

Monsanto Co. (NYSE: MON), the world's largest seed company, is scheduled to release fiscal fourth quarter earnings before the opening bell on Wednesday, October 6, 2010. Analysts, on average, expect the company to report a loss of 2 cents per share on revenue of $1.83 billion. In the year ago quarter, the company reported earnings of 2 cents per share on revenue of $1.88 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.

In the preceding fiscal third quarter, the St. Louis, Missouri-based company's net income was $384 million or 70 cents a share, down 45% from $694 million or $1.25 a share in the prior-year quarter. On an adjusted basis, the company earned 81 cents a share in the latest quarter. Revenue declined to $2.96 billion from $3.16 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 80 cents per share on revenue of $3.17 billion.

Late in August, the company said it expects ongoing earnings per share for the fiscal year in the range of $2.40 to $2.45, at the low end of its previous guidance of $2.40 to $2.60 range. The company said that this expectation reflects strong quarterly seed and trait sales in Latin America and other international markets, solid fourth-quarter performance of Monsanto's crop-protection business, and the realization of discrete tax benefits. The company still expects free cash flow in the range of $400 million to $500 million for the fiscal year.

Monsanto 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 generic competition and price pressure. The company now anticipates a steady-state gross pr ofit contribution of $250 million to $300 million from the Roundup and other glyphosate-based herbicide business.

Monsanto recently announced that it is extending its restructuring program to cover an estimated $180 million pre-tax costs to streamline the Roundup business. The restructuring will result in $180 million of pretax costs for severance and related benefits, facility closures and asset impairments. The company expects to record $150 million restructuring charge related to its Roundup herbicide business in the fourth quarter of fiscal year 2010. The restructuring charge will affect as-reported EPS by approximately 22 cents and will be primarily reflected in fiscal year 2010 with the remaining charge in fiscal year 2011.

The company is now trying to spur growth by focusing on its seeds-and-traits business, positioning it for mid-teens earnings growth going forward. However, Monsanto is also facing stiff competition in biotech seed market as its chief rival DuPont (NYSE:DD) is fast grabbing market share by offering products with fewer traits and at better prices. In August, Monsanto announced that it will cut prices for for its most expensive crop seeds next year by as much as 75 percent after it failed to gain market share in the US corn and soybean markets for the second year in a row.

Among other developments, the company raised its quarterly dividend to $0.28 per share from $0.265 per share. The dividend is payable on Oct. 29, 2010 to shareowners of record on Oct. 8, 2010.

In terms of stock performance, Monsanto shares are down over 30% since the beginning of the year.

Disclosure: Author doesn't own any of the stocks discussed here



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