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Monsanto
Strong momentum within Monsanto's seeds and genomics business underscores our enduring positive view on Monsanto Co. (MON). For the past two years, we have been advising investors to add to positions during periods of weakness given the company's leading market share position, brand strength, first-mover advantage, operational performance, and technological innovation. MON to this day remains one of the best growth stories in the agricultural segment.
Monsanto will be a prime beneficiary of the highest corn crop in decades planted this season in the US. About 90 million acres of corn, 67 million acres of soybeans and 12 million acres of cotton are expected to be planted, according to the USDA. The harvest season is already underway in the Southern Hemisphere. MON noted that Brazil's soybean harvest is ahead of schedule, and Argentina has already begun harvesting its soy and corn crops.
We expect the company will likely deliver earnings upside surprises throughout the year on a higher corn acreage, market share gains, and higher margins from stacked traits.
For the second quarter, per share earnings came in a nickel better than expected. The world's largest developer of genetically modified crops posted a 23% increase in profits of $543 million or 98 cents per share. Sales rose 18% to $2.62 billion on higher sales of corn seeds and genetics, which rocketed 47% in the quarter. In addition , MON enjoyed robust sales of Roundup and other glyphosate-based herbicides. Operating margins expanded by 100 basis points over the past year to 31.6%.
The St. Louis-based company raised the bar for the full year. It now forecasts earnings of $1.60-$1.65 per share, vs. consensus estimates of $1.63. This compares to its previously stated range of $1.50-$1.57. Net cash from operations for the year is also expected to be $1.42-$1.5 billion.
Today's results only further reinforce our positive position on the stock. Shares trade at 35.9x forward earnings, reflecting its attractive growth prospects. The multiple is still less than two times its 20% plus growth rate.
Feeds!