HenryTo
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Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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 Posted: Wed Oct 05, 2011 11:59 pm Post subject: Monsanto (MON) |
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Morningstar on MON's fiscal 4Q earnings:
| Quote: | | On Wednesday, Monsanto MON released fiscal fourth-quarter and full-year results that slightly outpaced our expectations, and we may marginally raise our fair value estimate. The company also gave 2012 earnings per share guidance of $3.34-$3.44. Our current EPS estimate for 2012 falls just outside the low end of management's forecast. We think the shares look moderately undervalued. Monsanto's corn seed business performed well in the quarter, with sales and gross profit growing 58% and 100%, respectively, compared with the prior-year quarter. Latin America provided a strong contribution to corn growth this year and should provide more momentum in 2012, as farmers in Argentina and Brazil accelerate adoption of newer products, driving higher margin for Monsanto. Optimism for Latin America is high, but the United States is still Monsanto's most important market. The company's Genuity reduced refuge family, which includes SmartStax, gained penetration in the U.S. in the year, as planted acres increased to 13 million from 3 million. The company is expecting 2012 acres of 22 million-24 million for this group of products. We think this growth is achievable, especially with the SmartStax product moving fully to refuge in bag. Monsanto's RIB products allow farmers to plant their entire field with one kind of seed, saving customers time by making planting more convenient. As Monsanto's product mix shifts more toward SmartStax and other reduced refuge products, gross margin should improve. In soybeans, Monsanto is targeting 27 million-30 million U.S. acres for Roundup Ready 2 Yield compared with 17 million acres planted this year. With legacy Roundup Ready soybean patents expiring in the U.S. before the 2015 planting season, Monsanto's soybean business could hinge on the company's ability to convince farmers to switch to Roundup Ready 2 Yield soybeans during the next few seasons. Assuming 75 million U.S. soybean acres are planted in 2012, Monsanto's penetration of the market would reach about 40% if the company hits its target; good progress, in our opinion. In the crop protection business, Monsanto disclosed that it will restate its financial statements for 2009 through 2011 related to the timing of accounting for glyphosate customer incentive programs. This comes after the Securities and Exchange Commission announced it was investigating Monsanto's glyphosate incentive programs. The restatements don't affect the seed and genomics business, and total company revenue and costs for each year will remain the same (only timing between quarters will change). It is good to see management proactive in dealing with the incentive program issue; however, the SEC investigation remains open and could result in penalties. Monsanto expects crop protection gross profit of roughly $800 million in fiscal 2012 (in line with our expectations). As expected, this is well below historical peaks for the business, as generic competition from China has permanently damaged glyphosate profitability. |
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