Will Monsanto's Q4 Feed Growth-Hungry Investors?

(RTTNews) - For a quarter that saw agricultural products provider Monsanto Co. (MON) mulling over a bid for Syngenta AG, analysts are forecasting a loss of $0.02 per share and revenues of $2.77 billion. The fourth-quarter results are due to be announced before the bell on Wednesday, October 7.

Q4, FY15 In Focus

The company expects its fourth-quarter results to be break-even. Monsanto reaffirmed its fiscal-year 2015 ongoing earnings per share guidance at the low end of the range of $5.75 - $6.00. Full-year 2015 EPS guidance on an as-reported basis continues to be expected at the low end of the range of $5.80 - $6.05 per share. Street is currently looking for full-year 2015 earnings of $5.76 per share.

The EPS guidance takes into account continued industry headwinds for the fiscal year, ranging from the significant deterioration of several key currencies versus the U.S. dollar and low commodity prices driving reduced acres.

Further, Monsanto confirmed its full-year 2015 free cash flow guidance of $2 billion - $2.2 billion, but at the low-end.

Also, the company now expects gross profit for seeds and genomics to be essentially flat year-over-year, but with roughly a half point in gross profit margin improvement. The company's global corn gross profit is now expected to be down more than $200 million for the full year as it is not expecting Latin America to have as strong a start as originally anticipated and because planted acres across Europe ended lower than it expected while COGS increased.

Monsanto noted that its global soybean business gross profit, while still expected to grow by more than $200 million for the full year is down slightly from prior estimates as it now appears that U.S. acres will be modestly lower than expected.

For Ag productivity, the company now expects the gross profit to be down only slightly for the full year, reflecting the benefit of the Scotts transaction as an offset to the anticipated 15% - 17% decline in gross profit related to the softening of generic glyphosate pricing and currency headwinds this fiscal year.

Q3 Performance

The company reported a 33% growth in third-quarter, reflecting the change in the U.S. Channel seed brand business model increasing gross profit in the third quarter, as well as strong Agricultural Productivity segment performance due to the recent licensing agreement with Scotts Miracle Gro. Ongoing earnings per share topped analysts' expectations, while quarterly revenues missed their estimates.

Third-quarter net income was $1.14 billion or $2.39 per share compared to $858 million or $1.62 per share in the prior-year quarter.

Excluding special items, ongoing earnings per share for the quarter was $2.39, compared to last year's $1.62. On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $2.07 per share for the quarter. Analysts' estimates typically exclude certain special items.

Net sales for the quarter grew 7.8% to $4.58 billion from $4.25 billion in the same quarter of last year, but missed sixteen Wall Street analysts' consensus estimate of $4.61 billion.

Segment wise, seeds and genomics revenues rose 4.9% to $3.19 billion, with corn seeds and traits sales accounting for nearly half of it and increasing 16.9%. In the Agricultural Productivity segment, net sales grew 14.9% to $1.39 billion from last year.

Gross profit margin for the quarter improved 500 basis points to 60% from last year's 55%.

Brett Begemann, president and chief operating officer for Monsanto, said:

"As I look at this year, we've delivered on many of the key milestones that we expect will enable us to continue to meet the needs of our customers and propel our growth. These milestones, along with licensing opportunities, disciplined spend and a solid capital allocation strategy, back our confidence in our ability to deliver on our target to more than double our 2014 ongoing earnings per share by 2019."

Confidence In The Long Term

Later in August, Monsanto said it has abandoned efforts to buy Syngenta AG (SYT), citing recalcitrance on the part of the Swiss pesticide producer to its sweetened offer. Previously, Monsanto raised its offer for Syngenta to 470 francs per share, or about $47 billion, from a prior offer in April of about $45 billion, but in vain.

Without a basis for constructive engagement from Syngenta, Monsanto will continue to focus on growth opportunities built on existing core business, the company said.

Monsanto said it would continue to focus on core businesses, and confirmed its confidence in delivering its five-year plan to more than double fiscal-year 2014 ongoing earnings per share by 2019.

The St. Louis, Missouri-based world's largest seed company Monsanto believes that it remains the best positioned to drive a comprehensive integrated strategy, with industry-leading assets in breeding, biotechnology, data science, next-generation biologicals, and multiple options to build on its existing crop protection portfolio.