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Monsanto Loss Could Crush Its Investors

Paul Ausick

Monsanto Co. (MON) posted fourth-quarter and full-year fiscal 2013 results before markets opened Wednesday morning. The fertilizer and seed maker reported a fourth-quarter adjusted diluted earnings per share (EPS) loss of $0.47 on revenue of $2.2 billion. In the same period a year ago, Monsanto reported an adjusted diluted EPS loss of $0.44 on revenue of $2.1 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for an EPS loss of $0.43 and $2.24 billion in revenue.

For the full-year Monsanto reported EPS of $4.65 on revenues of $14.86 billion. The consensus estimate called for EPS of $4.58 on revenues of $14.95 billion.

The company also announced this morning that it has agreed to acquire The Climate Corporation for approximately $930 million in cash. Climate Corp. provides a software platform for farmers and offers weather insurance that pays farmers if bad weather hits their profits.

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Monsanto said it expects fiscal year 2014 EPS of $5.00 to $5.20, which includes a charge of about $0.14 a share for the Climate Corp. acquisition. The company expects its Seeds and Genomics segment to be its biggest driver of growth as the company “significantly expands” its profit margins in the segment to deliver mid-teens margin growth. In the 2013 fiscal year gross margins in the segment grew less than 1%. That definitely qualifies as a significant improvement.

The consensus estimate for fiscal year 2014 EPS was $5.33, and revenues were forecast at $16.11 billion. Monsanto’s lower-than-expected guidance and the expectation that it can generate such substantial profit growth in its Seeds and Genomics segment should weigh on shares in Wednesday trading.

Monsanto’s shares are down about 2.4% in premarket trading this morning, at $103.00 in a 52-week range of $82.70 to $109.33. Thomson Reuters had a consensus analyst price target of around $117.90 before today’s report.

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