Monsanto Company (MON - Analyst Report) is set to report fiscal first-quarter 2014 results on Jan 8 before the market opens. Last quarter, the company posted a 9.30% negative surprise. Let us see how things are shaping up for this announcement.
Factors to Consider This Quarter
Monsanto has been growing organically as well as inorganically over the past few quarters. With the acquisition of Climate Corporation in Oct 2013, we expect the company to achieve greater success in the coming quarters. However, massive time and expenses toward innovative herbicide products and biotechnology traits make them high priced, thereby exposing the company to major price competition from local generic companies.
Additionally, the company’s Seeds and Genomics segment experienced a year-over-year revenue and gross profit decline in the fourth quarter of fiscal 2013. The presence of many market players in the segment is another concern.
Our proven model does not conclusively show that Monsanto is likely to beat earnings this quarter. That is because a stock needs to have both a positive Zacks Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Negative Zacks ESP: This is because the Most Accurate Estimate stands at 62 cents while the Zacks Consensus Estimate is higher at 63 cents. That is a difference of -1.59%.
Zacks Rank #3 (Hold): Monsanto carries a Zacks Rank #3 (Hold). However, the Zacks Rank #3 (Hold) when combined with a -1.59% Earnings ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement.
Other Stocks to Consider
Here are some other companies in the basic materials sector you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
The Andersons, Inc. (ANDE - Analyst Report), with Earnings ESP of +1.33% and a Zacks Rank #1 (Strong Buy)
Bunge Limited (BG - Snapshot Report),with Earnings ESP of +0.93% and a Zacks Rank #3 (Hold)
Exxon Mobil Corporation (XOM - Analyst Report), with Earnings ESP of +1.03% and a Zacks Rank #3 (Hold)