Saturday, April 19, 2014

Soybean Driving Monsanto's Profits, Has 11% Upside

This article was originally published by GuruFocus on April 11, 2014. 

By Sarfaraz A. Khan. Research assistant: Gohar Yousuf. 
Amid the heated debate over the use of genetically modified ingredients, Monsanto (MON) has released its quarterly results that came in well above the analysts’ estimates.

The company has reported double digit profit growth as it continues to enjoy strong demand of corn and soybean. The highlight of the current quarter was the soybean business, its fastest growing segment, which has become as profitable as corn business. The company has forecast earnings growth of at least 10% in the current year. Analysts, on the other hand, are expecting 15% growth.
Following the strong quarterly results, analysts at JPMorgan have upgraded Monsanto to overweight and have increased the price target from $115 to $125. The company’s shares are currently hovering around $112.30. JPMorgan’s price target represents a potential upside of 11%.

Quarterly Results

In the second quarter, Monsanto’s profits climbed 12.6% year-over-year to $1.67 billion, or $3.15 per share, while net sales increased 6.6% to $5.83 billion. This was better than analysts’ expectations of a profit of $3.07 per share from revenues of $5.8 billion. The growth was largely driven by expansion the of worldwide corn and soybean businesses.

Monsanto’s gross profit margin improved from 56% in the same quarter last year to 59% for second quarter fiscal 2014. Read full article at GuruFocus.