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Earnings Scorecard: Monsanto

MON CZZ

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Monsanto Company (MON - Analyst Report), an agricultural products manufacturer, reported fiscal first quarter 2013 results which were well above the year ago results as well as the Zacks Consensus Estimates.

We cover below the results of the recent earnings announcement, as well as the subsequent analysts’ estimate revisions and the Zacks ratings for the short and long-term outlook on the stock.

First Quarter Review

On Jan 8, Monsanto Company reported fiscal first quarter 2013 (ended Nov 30, 2012) earnings of 62 cents per share beating the Zacks Consensus Estimate of 37 cents by a solid 68%. Earnings of this company also grew a whopping 170% year over year, driven by a solid top-line growth.

The company generated revenues of $2.9 billion in the first quarter, an impressive increase of 20.5%, driven by improvement in the Seeds and Genomics as well as Agricultural Productivity segment. The revenues also surpassed the Zacks Consensus Estimate of $2.6 billion.

During the quarter, gross margin increased 260 basis points year over year to 47.5%.

Read our full coverage on this earnings report: Monsanto Surpasses Estimates

Earnings Estimate Revisions – Overview

Fiscal earnings estimates have moved in both directions since the earnings release, suggesting that analysts are circumspect about the long-term performance of the company.  We take a look at the earnings estimate details.

Agreement of Estimate Revisions

In the last seven days, two of the sixteen earnings estimates for 2013 have moved up, while none moved in the opposite direction. For 2014, five of sixteen estimates have been revised upwards, while one has gone down, over the same period.

Also, over the last thirty days, eleven of the sixteen estimates have been revised upwards for 2013, with one going down. A similar trend can be seen for 2014, where twelve of the sixteen estimates have gone up with one moving in the opposite direction, during the same time frame.

Magnitude of Estimate Revisions             

Earnings estimates for 2013 and 2014 have increased by four cents each over the last seven days to $4.50 and $5.18 per share, respectively. However, earnings have seen an increase of 2.7% and 2.4% for 2013 and 2014, respectively, over the last thirty days, to settle at the above.

Our Take

We expect the company to perform well in the future due to its corn as well as seed business, in regions like the US and Latin America. Moreover, Monsanto’s cost control initiatives are also encouraging. Also, the impact of strong first quarter financials makes us optimistic about the company’s performance. However, the increasing competition as well as the risk of currency rate fluctuations adds to our concerns.

We maintain a Neutral recommendation on the stock. Currently, MON has a Zacks Rank #2 (Buy). The company’s prime competitor Cosan Ltd. (CZZ - Analyst Report) has a Zacks Rank #1 (Strong Buy).

About Zacks Earnings Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

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