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Monsanto (MON) Q1 Earnings Top, Bayer’s Buyout Deal on Track

Zacks

Monsanto Company MON reported mixed results for first-quarter fiscal 2018 (ended November 2017).

Earnings

Quarterly adjusted earnings from ongoing business came in at 41 cents per share, surpassing the Zacks Consensus Estimate of 38 cents. The bottom line also came in higher than the year-ago tally of 21 cents per share.

Revenues

During the reported quarter, Monsanto generated revenues of $2,658 million, marginally up 0.3% year over year. However, the top line missed the Zacks Consensus Estimate of $2,723 million.

On a segmental basis, revenues from Seeds and Genomics dipped 4.2% year over year to $1,770 million. However, revenues from Agricultural Productivity were up 10.7% year over year to $888 million.

Monsanto Company Price, Consensus and EPS Surprise


Monsanto Company Price, Consensus and EPS Surprise | Monsanto Company Quote

Cost & Margins

Monsanto’s cost of sales dropped 3.2% year over year to $1,346 million during the fiscal first quarter. Gross profit margin expanded 190 basis points (bps) to 49.4% during the quarter.

Operating expenses during the quarter came in at $1,070 million, up 5.7% year over year. Interest expenses were $124 million, down 8.8% year over year.

Balance Sheet and Cash Flow

Exiting the fiscal first quarter, Monsanto had cash and cash equivalents of $3,102 million, higher than $1,856 million recorded at the end of fiscal 2017. Long-term debt was $6,949 million, as against $7,254 million recorded on Aug 31, 2017.

In the first three months of fiscal 2018, Monsanto generated net cash of 1,292 million from operating activities compared with $1,463 million recorded in the year-ago period. Capital spending flared up 31.9% year over year to $418 million.

Outlook

Monsanto anticipates its pre-tax income to improve in fiscal 2018. The company believes improved glyphosate pricing and elevated demand for innovative crop-yield enhancing solutions, such as Intacta RR2 PRO soybeans, will boost its near-term results.

Bayer Deal Prospects

This Zacks Rank #3 (Hold) stock believes Bayer AG’s BAYRY buyout deal will likely open up a number of opportunities for its business.

Bayer’s distinct crop protection portfolio, when combined with Monsanto’s popular Climate FieldView and Seeds & Traits platform, is anticipated to give rise to a highly competitive seeds traits and agricultural chemicals behemoth in the industry.

The largest all-cash deal ($66 billion), which awaits regulatory approvals, is anticipated to close by early 2018.

Stocks to Consider

Two better-ranked stocks in the same space are listed below:

Koppers Holdings Inc. KOP currently sports a Zacks Rank #1 (Strong Buy). The company has pulled off an average positive earnings surprise of 59.73% in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines Ltd. AEM carries a Zacks Rank #2 (Buy). The company generated an average positive earnings surprise of 58.83% over the trailing four quarters.

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