Monsanto Ups Guidance

Zacks

Monsanto Company (MON) recently raised its 2012 earnings per share guidance in the range of $3.65 to $3.70 on an ongoing basis and $3.73 to $3.78 on an as-reported basis from its former full-year earnings per share guidance level of $3.49 to $3.54 on an ongoing basis and $3.45 to $3.50 on an as-reported basis. The company’s continued strong third-quarter sales drove management’s year-over-year expectation up 25% for fiscal 2012 and foresees continued strong growth in fiscal 2013 as well. 

Monsanto has also projected third-quarter earnings per share of $1.57 to $1.62 on an ongoing basis and $1.69 to $1.74 on an as-reported basis, reflecting full-year expectation of strong performance, rise in seasonal seed sales and discrete tax adjustment. Management, however, narrowed full-year free cash flow guidance to $1.7 billion to $1.8 billion from the previous range of $1.6 to $1.8 billion

Furthermore, the company expects net cash provided by operating activities to be $2.6 billion to $2.8 billion, and net cash required by investing activities to be $900 million to $1 billion for fiscal year 2012. This is compared with the previous projection wherein the net cash provided by operating activities was expected to be $2.5 billion to $2.8 billion and net cash required by investing activities was projected to be in the range of $900 million to $1 billion for fiscal 2012.

Over time, Monsanto has been witnessing upside in volume and a mix benefit within the Seeds and Genomics segment, especially in corn traits. With continued R&D lineups, the company successfully increased their yields, while reducing the use of key resources.  Such cost-effective business improvements are anticipated to ensure the above projected growth momentum in 2012, while continuing its success journey in 2013.

The company competes with peers including Syngenta AG (SYT) and BASF SE (BASFY). We currently maintain a long-term ‘Neutral’ recommendation on the stock. Also, Monsanto has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating (1-3 months).

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