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Monsanto (MON) Premium Herbicide Declared Non-Carcinogenic


The latest research conducted by the National Cancer Institute (‘NCI’) confirmed that Monsanto Company’s MON divisive herbicide — Roundup — is not carcinogenic. The company’s share price moved up to $118.15 on Nov 13, after the news surfaced last Thursday.

Roundup’s Glyphosate is Non-Cancerous

Monsanto’s Roundup is a widely used weed killer in the United States. Several studies conducted over the last few years claimed that its primary ingredient — glyphosate — poses health problems to mankind by causing cancer. For instance, in 2015 a study conducted by the World Health Organization’s International Agency for Research on Cancer characterized glyphosate as probably carcinogenic. Notably, critics also viewed this chemical as harmful to the environment. Such arguments forced countries like Sri Lanka and Colombia to completely ban Roundup’s aerial spray.

However, some studies contradicted the industry-wide concern and stated that there is no significant relationship between cancer and glyphosate usage. The European Food Safety Authority noted that glyphosate is unlikely to pose a carcinogenic hazard to humans. In March 2017, the European Chemical Agency confirmed that the Roundup weed killer is entirely safe for public use.

The NCI collected long-term data from the Agricultural Health Study for monitoring the health status of roughly 90,000 individuals in North Carolina and Iowa from 1993 to 2010. The result revealed that there is no linkage between glyphosate and cancer.

Agro-Chemical Industry in Focus

Amid concerns like volatile demand and input cost pressure, the global seed, traits and agricultural chemical industry is anticipated to gain momentum on the back of shale gas revolution in the United States. Per the American Chemistry Council, the U.S. shale boom has carved path for 310 new chemical projects. New provisions of natural gas have captured chemical investors’ attention in the country. Moreover, the rebounding construction market and a resilient automotive sector are expected to propel this industry’s near-term growth. We note that the Zacks Agricultural Products industry is currently placed at the top 30% out of the 256 Zacks Industries.

However, we also notice that new profit-making opportunities have triggered the degree of Monsanto’s business rivalry with the worldwide agricultural chemical market. There is an ongoing trend of consolidation in the contemporary seed, trails and Zacks Agricultural Products. Swiss giant Syngenta AG SYT was successfully acquired by ChemChina for $43 billion in June 2017. Furthermore, in September 2017, The Dow Chemical Company and DuPont joined forces to form the DowDuPont Inc. DWDP.

Monsanto Displays Robust Growth

Monsanto currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B. Over the last year, shares of this company yielded a return of 19.2%, outperforming 16.9% growth recorded by the industry.

Monsanto anticipates its fiscal 2018 earnings will likely be stronger on the back of improved Intacta penetration and pricing in South America, gains secured from the Precision Planning business spin-off (Sep 5, 2017) and increased Agriculture Productivity segment’s gross profit. We believe the aforementioned NCI declaration will increase Roundup’s sales and thus boost Monsanto’s near-term results.

In addition, Monsanto accepted Bayer AG’S BAYRY buyout offer worth $66 billion, inclusive of debt, in September 2016. The company believes that the deal will likely open up a number of new business opportunities going forward.

Monsanto’s earnings per share are predicted to be up 12.1% in the next three to five years.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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