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Monsanto (MON) Upgraded to Buy on Robust Growth Drivers

Zacks

On Sep 14, Monsanto Company MON was upgraded to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold). Going by the Zacks model, Zacks Rank #2 companies are likely to perform better than the broader market over the upcoming quarters.

Over the last six months, Monsanto’s shares yielded a return of nearly 4%, outperforming roughly 2% growth recorded by the industry.



Notably, the stock’s projected earnings per share (EPS) and sales growth for fiscal 2018 are currently pegged at 9.2% and 2.8%, respectively.

Reasons for the Bullish Run

Monsanto, along with its subsidiaries, is a leading global provider of agricultural products. The company’s Seeds and Genomics segment offers premium crop-yield enhancing products such as Roundup Ready 2 Xtend soybeans. Also, specialized glyphosate-based herbicides are traded under the company’s Agricultural Productivity segment.

Monsanto and its allied licensed partners anticipate to supply Roundup Ready 2 Xtend soybeans to almost half of the entire soybean acreage in the United States for the 2018 crop season. On the other hand, the company believes demand for its unique XtendiMax herbicide has been gradually shooting up over time. Hence, elevated demand for these state-of-the-art products will likely boost the company’s top-line performance in the near-future.

It should be noted that currently the seed, traits and agricultural chemical industry is highly competitive and dominated by an ongoing trend of consolidation. Notably, after Syngenta AG SYT was acquired by ChemChina in June 2017, competitive pressure over Monsanto has intensified even more than before.

Monsanto accepted Bayer AG’s BAYRY buyout deal last September, in its efforts to grab the leading position in the industry. Bayer’s supreme crop-protection business, when combined with Monsanto’s robust seeds, traits and Climate FieldView platform would likely give rise to the most powerful agricultural chemicals’ company in the industry. Both the companies anticipate to close the deal by the end of calendar year 2017.

Moreover, Monsanto is steadily strengthening its business on the back of bold restructuring moves and strategic innovations. This month company’s subsidiary — The Climate Corporation — divested its Precision Planting LLC equipment business to AGCO Corporation AGCO. Proceeds of such deals are used to finance Monsanto’s growth programs. For instance, the company constantly tries to boost its product portfolio on the back of new innovation projects. For instance, The Climate Corporation rolled out its new Climate FieldView Plus platform this August, for the purpose of helping cultivators manage data more efficiently in the 2018 crop season.

Monsanto anticipates reporting adjusted earnings at the high-end of the $4.50-$4.90 per share range for fiscal 2017. It is scheduled to release the fourth quarter and fiscal year 2017 results on Oct 4 before the market opens.

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