Updated Research Report on Monsanto - Analyst Blog

On Apr 15, 2014, we issued an updated research report on Monsanto Company MON. The company reported improved year-over-year results for the second quarter of fiscal 2014 (ended Feb 28, 2014). Earnings per share increased roughly 15% to $3.15, while revenues rose roughly 6.6% to $5.8 billion.

The hike in results was primarily a result of year-over-year improvements in the corn and soybean demand in various regions. The company has also been launching products to gain a significant market share. In fiscal 2014, the company unveiled the Intacta technology, which is expected to facilitate soybean growth over the coming years.

Monsanto's efforts to curb costs have also been noteworthy in the recent past. In the reported quarter, the company expanded gross profit margin by 12% year over year. Additionally, corn margins were up 2.5% year over year, which is expected to increase 3% toward the end of the fiscal year.Moreover, soybean margins increased 7% year over year, targeted at a range of 6–8% for fiscal 2014.

However, overseas operations of the company expose it to foreign currency fluctuations, thereby impacting its earnings. In fiscal 2014, earnings per share are expected to be affected by roughly 15 to 20 cents due to negative impacts from foreign currency transactions.

Moreover, Monsanto's research and development involves huge investments and governmental permits. Massive time and expenses toward such innovative herbicide products and biotechnology traits make them high priced exposing the company to major price competition from local generic companies.

With a market capitalization of roughly $58 billion, Monsanto currently holds a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include The Andersons, Inc. ANDE, Gruma S.A.B. de CV GMK and CVR Partners, LP UAN. All these stocks carry a Zacks Rank #2 (Buy).