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Monsanto (MON) Q3 Earnings and Revenues Miss, Down Y/Y

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Monsanto Company reported weak third-quarter fiscal 2016 (ended May 31, 2016) results. Diluted earnings from ongoing business came in at $2.17 per share that missed the Zacks Consensus Estimate of $2.41. The bottom line also decreased from the year-ago figure of $2.51 per share.


Revenues

In fiscal third quarter, Monsanto generated revenues of $4,189 million, down 8.5% year over year. The top line also fell short of the Zacks Consensus Estimate of $4,425 million.

On a segmental basis, revenues from Seeds and Genomics inched up 0.4% year over year to $3,207 million. Revenues from Agricultural Productivity declined 29.1% year over year to $982 million.

Cost & Margins

Monsanto’s cost of sales fell 1.8% year over year to $1,809 million. Gross margin contracted 300 basis points to 56.8%.

Operating expenses, which account for 27% of the total revenue, increased 3.6% year over year to $1,131 million. Interest expenses were up 4.2% to $100 million.

Balance Sheet and Cash Flow

Monsanto exited the fiscal third quarter with cash and cash equivalents of $1,205 million as against $3,701 million at the end of fiscal 2015. Long-term debt was $7,948 million, down 5.7% year over year.

In the quarter, Monsanto generated cash of $415 million from operating activities as against $30 million used in the year-ago comparable period. Capital spending declined 5% year over year to $666 million. Dividend payments in the quarter totaled $727 million.

Free cash flow at the end of the first nine months of fiscal 2016 was $224 million compared with $789 million in the year-ago period.

Outlook

Monsanto aims to improve its business through increased innovation and tactical restructuring initiatives. However, considering headwinds in the global and industrial markets, the company expects earnings per share at the lower end of the $4.40–$5.10 range in fiscal 2016.

Stock Price Impact

As of Jun 28, 2016 Monsanto’s stock price stood at $101.09 per share, up 15.8% since Apr 1, 2016.

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Moreover, the company recently inked new agreements with Sumitomo Chemical, DuPont, Nomad Bioscience GmbH and TargetGene Biotechnologies LTD. These deals are expected to enrich the company’s product portfolio with more innovative technology. Although initiatives like these raise optimism, it remains to be seen how the stock performs after the lackluster fiscal third-quarter 2016 results.

Stocks to Consider

Monsanto currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include First Majestic Silver Corp. (AG - Free Report) , Albemarle Corporation (ALB - Free Report) and B2Gold Corp. (BTG - Free Report) . All the three companies currently sport a Zacks Rank #1 (Strong Buy).

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