Stocks Trending Alert – Monsanto Company (NYSE:MON)
On Wednesday, Monsanto Company (NYSE:MON) closed at $115.31 with trading volume of 5.47 shares. The company gained 0.96% with market capitalization of 50.93B. During the year the lowest point at which share traded is $84.79 and hit the highest point at $116.37.
Monsanto Company (MON) declared strong second quarter and first six months results. Earnings per share (EPS) reached $3.09 on an as-stated basis and $3.19 on an ongoing basis for the second quarter of fiscal year 2017. The company’s performance was driven in part by strong gross profit growth from its corn and soybean businesses, the absence of the Argentine peso devaluation and benefit from the sale of its Latitude® wheat fungicide business. In reporting earnings results, executives reinforce confidence about the cumulative strength of the business, updating full-year guidance to the high end of the range for both as-stated and ongoing EPS. Monsanto also highlights progress in its merger with Bayer as both parties continue to work toward completion of the transaction by the end of calendar year 2017.
“We are pleased to have delivered such an outstanding first half and strong second quarter, in the face of what is still a tough macro economy for agriculture,” said Hugh Grant, Monsanto chairman and chief executive officer. “While we’re increasing confidence in the outlook for the rest of the year, our importance at Monsanto is where it has always been – on bringing innovation to growers. Our proven innovation and unique platform advantages position us well to meet the challenges ahead, in addition to make us an attractive, complementary partner for Bayer.”
Results of Operations:
Monsanto’s net sales for the quarter rose to about $5.10B, up from $4.50B in the prior year period. Gross profit for the quarter also rose over the prior year period to $3.0B as compared to $2.60B for the prior year period. For the first six months, net sales raised to $7.7 billion and gross profit was $4.20B; significantly outpacing the first half of fiscal year 2016.
For the second quarter of fiscal year 2017, selling, general and administrative costs were $657.0M and research and development expenses were $381.0M.
The company stated $3.09 EPS for the second quarter of 2017 on an as-stated basis and $3.19 EPS on an ongoing basis, well above the prior year ongoing EPS of $2.42. This growth of more than 28 percent in both as-stated and ongoing EPS was driven by three things: more than $300.0M of gross profit growth from its corn and soybean businesses, the absence of the approximate $180.0M Argentine peso devaluation, and the $83.0M gain from the sale of the Latitude business recorded in other income for the quarter.
In the first six months of fiscal year 2017, as-stated EPS was $3.16 and ongoing EPS was $3.39 EPS, contrast to $1.80 as-stated and $2.25 ongoing in the previous year.
Cash Flow:
During the first six months of fiscal year 2017, net cash offered by operating activities was a source of about $1.50B, contrast to about $1.40B the same period last year. Net cash required by investing activities for the first half of fiscal year 2017 was $438.0M, contrast to $483.0M for the same period of fiscal year 2016. Net cash required by financing activities for the first half of 2017 was about $494.0M, contrast to net cash required of $3.50B for the same period of fiscal year 2016. Free cash flow was a source of nearly $1.0B for the first half of fiscal year 2017, as compared to $900.0M for the first half of fiscal year 2016.
As anticipated, the company’s operating expenses raised in the quarter with the return to growth of the business. This was partially offset by continued savings from restructuring and transformation actions. The company anticipates these savings to continue and to generate about $200.0M of operating expense and cost of goods sold savings as compared to the prior year, yielding $500.0M of savings by fiscal year 2018 from the fiscal year 2015 base.
Fiscal Year 2017 Outlook:
Monsanto updated its fiscal year 2017 as-stated EPS guidance to be at the high end of the range of $3.95 to $4.44. On an ongoing basis, fiscal year 2017 ongoing EPS is also predictable to be at the high end of the range of $4.50 to $4.90. This reflects the company’s raised confidence in the growth predictable for the year and assumes the change in currency rates will have a relatively neutral effect on a full-year basis.
From a gross profit perspective, the company continues to expect the Seed and Genomics segment gross profit to increase mid-single digits as a percent year-over-year. Within its Ag Productivity segment, gross profit is still predictable to be in the range of $850 to $950.0M, though now at the lower end of the range.
For third quarter, the company anticipates as-stated earnings per share to be roughly flat because of the absence of Argentine-related tax matters call-out of $0.50 per share, mostly offset by the predictable decline in ongoing earnings per share, from the absence of the alfalfa deal, which equaled roughly $0.34 cents of earnings last year, and the volume timing shift from third quarter to second quarter in the Europe and U.S. corn businesses.
For the full year, the company now anticipates these earnings to translate to the high end of the range of $1.20B to $1.60B of free cash flow, reflecting operating cash flow at the high end of the range of $2.40B to $2.80B and capital expenditures of $1.20B for fiscal year 2017.
Overall operating expenses in 2017, apart from the pending Bayer transaction-related costs and restructuring charges, are predictable to increase slightly with the growth of Monsanto’s business.
Technical Analysis:
The Company has price-to-cash ratio of 23.03 and EPS ratio of 3.63. The company net profit margin is 11.60% and gross profit margin is 52.90%. The stock has shown quarterly performance of 9.77% and a half-year performance stands at 14.07%. The stock price is moving up from its 20 days moving average with 1.46% and isolated positively from 50 days moving average with 3.24%.
Analyst recommendation for this stock stands at 2.30.