Monsanto: Good Results, Higher Expectations

Monsanto (MON) reported very good results this morning, although a bit light on the revenue line - expectations just are so high for this name and at 40x forward estimates it's a quite rich valuation. Fortunately to offset the light top line number, they raised earnings guidance for the year which is helping to support the name to a degree in pre-market. For stocks priced to perfection you need to hit on all cylinders and a perceived revenue "miss" would of dropped the stock a bit more, but the raised guidance will help offset any major long term worries.

• Monsanto reported record net sales of $3.6 billion for the third quarter of fiscal year 2008, which were 26 percent higher than sales in the same period in fiscal year 2007. Results in the quarter reflected increased revenues from the company's Roundup agricultural herbicides globally, increased soybean seed and traits revenues in the United States, increased corn seed and trait revenues in the United States, higher corn seed revenues in Europe-Africa, and higher cotton seed and trait revenue in the United States.
• Monsanto's net income for the third quarter of fiscal year 2008 was $811 million or 42 percent higher than net income in the same period last year.
• Earnings per share (EPS) for the third quarter of fiscal year 2008 were $1.45 both on an as-reported basis and an ongoing basis.

Outlook

• Monsanto's fourth quarter is largely influenced by its global cotton business and U.S. Roundup agricultural herbicides business. The company historically records a loss in the fourth quarter.
• Monsanto now expects that its full-year 2008 EPS will be approximately $3.63 on a reported basis and approximately $3.40 on an ongoing basis. (For a reconciliation of ongoing EPS, see page 1). Monsanto's full-year 2008 EPS guidance on a reported basis does not include an estimate for the in-process, research and development charge associated with the company's fourth quarter acquisitions.

You can see from the headlines below on earlier posts on this company they have been continuously raising guidance...

[Jun 5: Monsanto Plans to Double Grain Yields by 2030; Some Have Doubts]
[Apr 2: Monsanto Hilarious Reaction to Guidance]
[Feb 12: Monsanto Raises Guidance Yet Again]
[Jan 3: Monsanto - Very Good Earnings and Raised Guidance]
[Oct 9: Looking Ahead to Monsanto]

Disclosure: No position.

Comments

[maxbid]

Well Mark, do you recommend Buy, Sell, or Hold?

[TraderMark]

I'd wait for further pullback myself. Valuation is rich. Its 50 day moving average is where it currently sits so you might layer in a buy here if you have no position to begin a stake.

It depends on how bad the market gets - if we get the waterfall type of selling in Jan and March 08 you will see a move down to 200 day. If we are near exhaustion on the selling it should hold here. I tend towards the former myself, but clearly am guessing as we all are.