Update: Monsanto Could Double Its Profits

Nov. 14, 2014 3:28 PM ETMonsanto Company (MON-OLD)1 Comment
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Summary

  • Monsanto is looking to double its profits.
  • The company has set strong foot-prints for potential growth.
  • MON is a good stock buy and hold.

Monsanto Co. (NYSE:MON-OLD) recently predicted a gross profit growth of $4B, at a Morgan Stanley Conference. The company is expecting to double its profits over the next five years on the back of seeds and Genomics business. Monsanto is seeing long-term growth in Seeds and Genomics business, which now accounts for 80% of sales. And, it is expected that Intacta RR PRO soybean acreage may increase three-to-four times in Latin America. It is also ramping-up its soybean traits. On the other hand, MON is looking to generate steady annual growth from its global corn platform with the expansion of corn footprints in new markets and portfolio leverage. In addition, it is also predicting a stable growth in complementary seed platforms including Canola, cotton, and vegetables.

I believe that the company has potential to make big profits in the next five years. In the most recent financial report, Monsanto has shown that it is on track to make cash from growth opportunities. In fiscal 2014, MON has posted high mid-single-digit growth in sales and a double-digit growth in earnings. Its operating cash flows also expanded to $3.1B compared to $2.7B in the past year. They are also setting footprints for potential growth with the continued investment in their key platforms and portfolio management. It has invested around $2.1B in the growth opportunities including The BioAg Alliance with Novozymes and the Climate Corporation acquisition. In addition, MON has been offsetting increased investments on the new technology platforms with disciplined capital and cost cutting approach for base business.

One more factor, which I believe will enhance its earnings per share, is its focus on buybacks. The company is aggressively lowering its outstanding shares. It had recently completed a buyback program of $2B and announced a new buyback program of $10B. These buybacks will also enhance

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Winning Strategies is a firm of Charter Accountants. We offer business services including Accounting, Bookkeeping and Business Plans with complete future forecasting at extremely competitive prices. Winning Strategies also offer analysis on Global Business and Equities. We offer a variety of researched papers from a short blog to a complete researched report. We favor stocks with strong business models and high overall potential as companies. Our strategy is to seek out those companies that are competent at generating solid top and bottom line growth, and with the potential to generate massive cash flows. Once we locate this type of opportunity we recommend holding the stocks for a long-term play, while seeking a constant stream of income from dividends combined with the capital gains these quality stocks offers.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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