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Bear of the Day: Monsanto Company (MON)

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Headquartered in St. Louis, Missouri, Monsanto Company (MON - Free Report)   is a leading global provider of agricultural products. It has two operating segments-- Seeds and Genomics, and Agricultural Productivity.

The Seeds and Genomics segment produces corn, soybeans, canola and cotton seeds, as well as vegetable and fruit seeds. This segment also develops biotechnology traits to control insects and weeds.

The Agricultural Productivity segment consists of other glyphosate-based herbicides for agricultural, industrial, ornamental and turf applications and lawn-and-garden herbicides.

Results Better-than-Expected but Guidance Disappoints

The company reported better-than-expected results for its fiscal Q4 ended Aug 31, 2016.

Adjusted earnings came in at $0.07 per share beating the Zacks Consensus Estimate of a loss of $0.02 and much better than the year-ago loss of $0.19 per share.

For fiscal 2017, the management expects earnings to be between  $3.83 to $4.35 per share, which was lower than street estimates.

Falling Estimates

Analysts have slashed their estimates for the company in view of the negative outlook.  Zacks Consensus Estimates for the current and the next fiscal year are $4.72 per share and $5.26 per share respectively, down from $4.90 and $5.68, 30 days ago. Declining estimates sent the stock to a Zacks Rank #5 (Strong Sell).

Skepticism over Merger with Bayer

Last month, the company announced they had agreed to be bought by the German pharmaceutical company Bayer in a $57 billion deal.

According to a report in FT, the deal is likely to face tough antitrust scrutiny. Two more mega deals have been announced in this space, merger of Dow Chemicals and Dupont and ChemChina’s acquisition of Syngenta and these together would reduce the number of global players in global agribusiness to four from six.

Since both the companies have wide spread global operations, the deal would require approval from about 30 regulators and antitrust authorities around the world.

This uncertainty has been weighing on Monsanto shares while the deal is expected to close by the end of 2017, according to the company.

The Bottom-Line

 Agricultural product companies have suffered from a weak global economy and falling crop prices. Crop prices have been sliding for more than three years now thanks to record crops. 

Agricultures Products industry is currently ranked 227 out of 265 Zacks industries (bottom 14%) This trend is expected to continue in the coming months, leading to more pain for agribusiness stocks.

More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

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