Monsanto Profit Beats Street, but Outlook Disappoints
Monsanto posted a higher-than-expected quarterly profit and raised its full-year forecast, but its shares fell more than 6 percent as Wall Street expressed disappointment that the company's results and outlook were not stronger.
The St. Louis-based agricultural products company, a global leader in the development of biotech crops, said revenue jumped 26 percent to a record $3.6 billion in the fiscal third quarter that ended May 31, though that fell shy of the average Wall Street estimate of $3.7 billion, according to Reuters Estimates.
Net income climbed 42 percent to $811 million. Earnings, both on a net basis and an ongoing basis, amounted to $1.45 a share, compared with $1.02 a year earlier on an ongoing basis and $1.03 net. Analysts, on average, were looking for $1.36 a share on an ongoing basis.
Monsanto also said it expects full-year net earnings of about $3.63 a share, or $3.40 excluding items, lighter than analysts' average forecast of $3.41. The company's previous guidance had set ongoing earnings for the year in a range of $3.15 to $3.25 per share.
Monsanto said sales of Roundup and other herbicides saw sharp gains, climbing 54 percent, while total seed and genomic sales climbed 20 percent amid increased soybean, corn and cotton seed sales in the United States and higher corn seed revenues in Europe and Africa.
"Roundup clearly did very well. Corn was a little soft," said Soleil Securities analyst Mark Gulley.
He and other analysts said lower-than-expected gross profit, including that of corn seed and traits, were disappointing.
A lower-than-expected tax rate also helped boost the company's results, analysts pointed out.
Net sales of corn seeds and traits for the third quarter were $975 million, up 9 percent from a year earlier. Soybean sales rose 38 percent to $447 million, cotton was up 32 percent at $279 million and vegetable and fruit seed sales were up 9 percent at $185 million.
Monsanto officials said they expect the Dekalb corn seed brand to gain 2 to 3 percentage points in U.S. market share this year, while the American Seeds brands should gain 1 to 2 points. In Argentina, Monsanto's brand increased 5 percentage points, although brands held share flat in Brazil.
The company also laid out a partial plan to increase seed prices for 2009 with some corn prices seen rising as much as 35 percent.
Monsanto Chairman and CEO Hugh Grant said the company was on track to double its 2007 gross profit to more than $8 billion by 2012, and said current world concerns about sufficient supplies of costly food and fuel provide significant market opportunities.
"We have the solutions in hand to be a significant part of that answer," Grant said in a conference call.
The company expects free cash flow for fiscal year 2008 will be $550 million, reflecting the $850 million acquisition earlier this month of De Ruiter Seeds, as well as the recently announced acquisition of Marmot, S.A., which operates a privately held seed company headquartered in Guatemala.
Free cash flow excludes amortization and depreciation but includes capital expenditures.
Shares fell $8.48, or 6.24 percent, to $127.30 in midday trading after on the New York Stock Exchange.