Earnings Preview: Monsanto Company

Monsanto Company ( MON - Analyst Report ) will be reporting its third-quarter 2012 financial result on Wednesday, June 27, 2012.

The current Zacks Consensus Estimate for earnings per share is $1.59, representing an annualized growth of 25.93%.

With respect to earnings surprises over the trailing four quarters, Monsantooutperformedthe Zacks Consensus Estimate in all four quarters. Average earnings surprise was 15.16%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Second Quarter 2012 Highlights

On April 5, Monsanto Company posted strong financial results for the second quarter of fiscal 2012 with an earnings per share from ongoing business of $2.28 ($2.24 on an as-reported basis), surging much above $1.87 recorded a year ago. The results exceeded the Zacks Consensus Estimate of $2.12.

The company generated revenues of $4,748 million, up from $4,131 million registered in the year-ago quarter. The revenue exceeded the Zacks Consensus Estimate of $4,608 million based on improved sales across segments, especially Seeds and Genomics.

During the quarter, gross margin was recorded at approximately 57%, up slightly from 56% recorded in the year-ago comparable quarter.

Agreement of Estimate Revisions

In the last 30 days, out of twelve analysts, eleven increased the company’s earnings per share estimates for the third quarter of 2012, while no one decreased the same. For fiscal 2012, of the fifteen analysts, thirteen increased their earnings per share estimate, whereas none decreased the same. Besides, twelve out of sixteen analysts increased estimate for fiscal 2013.

Magnitude of Estimate Revisions

Estimates over the last 30 days increased from $1.30 per share to $1.59 for the third quarter of 2012.

Estimate for fiscal 2012 increased from $3.56 to $3.70 over the last 30 days and estimate for fiscal 2013 increased from $4.11 to $4.25. These estimates represented a year-over-year growth of 25.05% and 14.72% for 2012 and 2013, respectively.

Our Take

We are optimistic on the company’s improved U.S. Business, especially in corn traits. Moreover, continuous increase in production supported by the company’s innovation and technology upgradation look promising. We believe volume and a mix benefit across segments will capture profitability in the upcoming results.

Missouri-based Monsanto Company, together with its subsidiaries, is a leading global provider of agricultural products for farmers in the United States and internationally. Monsanto's biotechnology research and rich product pipeline give tough competition to its peers, such as The Dow Chemical Company ( DOW - Analyst Report ) , Syngenta AG ( SYT - Analyst Report ) , The Scotts Miracle-Gro Co ( SMG - Snapshot Report ) , and BASF ( BASFY ) .

We currently maintain a long-term Neutral recommendation on the stock. Monsanto has a Zacks #2 Rank, which translates into a short-term Buy rating (1-3 months).