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Earnings Preview: Monsanto Co.

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Agricultural products giant Monsanto Co. is all set to unveil its first quarter 2013 results before the start of trading on January 8, 2013. The Zacks Consensus Estimate for the first quarter is 37 cents (estimated year-over-year increase of 60.1%) on revenues of $2.66 billion (year-over-year increase of 9.2%).

Second Quarter Recap

Monsanto’s fiscal fourth quarter 2012 (ended August 31, 2012) loss per share from ongoing business of 44 cents was much wider than a loss of 22 cents reported in the year-ago quarter. The loss was however in line with the Zacks Consensus Estimate of a loss per share of 44 cents.

The company generated revenues of $2,110 million in the fourth quarter, down 6.1% year over year. The results were in line with the Zacks Consensus Estimate of $2,110 million.

For the fiscal 2012, revenue amounted to $13,516 million, up 14.3% from $11,822 million reported in 2011 and down from the Zacks Consensus Estimate of $13,627 million.

Read our full report at MON Posts In-Line 4Q Results

Agreement of Estimate Revisions

Over the past 30 days, only one of 11 estimates for Monsanto’s first quarter 2013 earnings has been revised upward. None of the estimates have been reduced for the quarter over that timeframe. Of 17 estimates for 2013, none have been revised in either direction over the last 30 days.

Magnitude of Estimate Revisions

Given the limited estimate revisions, the consensus estimate for the first quarter of 2013 has increased by a cent over the last 7 as well as 30 days to 37 cents. The consensus estimate for 2013 has also increased by a cent to $4.39 over the same timeframe.

Surprise History

Monsantodid well in the last four trailing quarters as far as its performance is concerned in relation to the Zacks Consensus Estimate; measured in terms of earnings surprise. Although not by a consistently high margin, the company outdid the Zacks Consensus Estimate in three out of the four trailing quarters, with an average earnings surprise of 10.4%.

Our Recommendation

Currently, the stock carries a Zacks #2 Rank (a short-term Buy rating) whereas its competitor Cosan Ltd. (CZZ - Free Report) bears a Zacks #1 Rank (Strong Buy).

We are optimistic about revenue and earnings escalation for the forthcoming quarter, in view of the seasonal nature of the company, given the purchasing and growing patterns of the US, Latin America and Europe, which are the largest contributors to revenue.

However, sales are expected to peak in the second quarter of fiscal 2013. Management now forecasts earnings in the range of $4.18-$4.32 for fiscal 2013, much better than $3.70 reported in fiscal 2012, gaining from increased production activities and regular innovations.

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