Monsanto: Revised Guidance Peaked Options Activity

Monsanto Company (NYSE:MON) shares are down 7% this week to $83 after lowering their Q3 guidance to $1.15 a share, down from its prior forecast range of $1.60 to $1.62 a share. The talking heads were expecting $1.61 per share and the options on MON have been buzzing like crazy this week, so is this Ag stock a buy or do you sit on it?

Monsanto said this week it expects full-year earnings of $4.40 per share, the lowest end of its previous forecast range of $4.40 to $4.50 per share.

The lowered guidance sent Monsanto’s shares plummeting $4.36, or -5.1%, in morning trading Wednesday.

MON still has a 1.31% dividend yield, based on today's stock price of $81. The stock has near-term technical support in the $77-79 price area. So the question is, will shares rebound and when do you make a move?

Following Monsanto's guidance, Jefferies & Co. issued two target price reductions:

28-May-09 Reiterated Jefferies & Co Buy $100 → $97

26-May-09 Reiterated Jefferies & Co Buy $106 → $100

Andrea Kramer gave her 2 cents on Monsanto's recent option activity :

The bears bombarded Monsanto Company (MON) on Wednesday, after the agricultural issue said it expects 2009 earnings of around $4.40 per share, in the low end of its forecast, thanks to escalating competition in the herbicide industry.

According to data from WhatsTrading.com, the security saw roughly 19,500 puts cross the tape, more than tripling its average daily volume of fewer than 5,800 contracts. Most active was the stock's June 80 put, which saw about 5,000 contracts change hands. In early activity, the June 75 and October 65 puts are most popular, as each has seen more than 1,000 contracts cross the tape so far today.

On the flip side, MON saw roughly 36,000 calls change hands yesterday, more than tripling its average single-session volume of about 10,800 bullish bets. However, it seems most of the optimists were abandoning ship after the company's revised outlook; call open interest at the July 95 strike dropped by nearly 10,000 contracts overnight. Nevertheless, this deep out-of-the-money strike remains home to peak call open interest in the back-month series, with nearly 18,000 contracts in residence.

At last check, the shares of MON have backpedaled about 75 cents, or 0.93%, to hang out in the 79.25 neighborhood. From a longer-term perspective, the stock is poised to close the week beneath double-barreled support at its 10-week and 20-week moving averages for the first time since early March.

Here's the chart on Monsanto.

We'll be adding MON to our watch list. Besides trading at the mercy of day traders, Monsanto can get hurt further on any bad Ag or commodity related news. However, the chart on MON appears to indicate a decent entry point -- you be the judge.

Happy Safe Investing.

Disclosure: No positions in Monsanto Company

Comments

[P6445:]

MON only dropped their FY earnings target by a nickel. Wow! The reaction was overblown; I wish I could have bought more than I did. Even the writers couldn't keep up with the stock price. (The acticle calls it 79.25 and 81 and 83.)

May 30 06:56 AM

[kewlhand:]

Not only was the reaction overblown, but the focus has been on chinese competition, when MON clearly stated the WEATHER was also another big factor (late planting in US because of wet fields). That just means later buying in my opinion, so should recover sales.

If you exclude the temporary effect of the weather, and include the fact that a) The dollar is falling fast, and b) People are discovering the chinese knockoff is ineffective! my guess is MON should rebound very nicely and continue it's long term growth pattern...

May 31 07:51 AM