Monsanto Q2 Earnings Rise on Higher Corn Sales - Analyst Blog

Monsanto Company MON reported improved results for the second quarter of fiscal 2014 (ended Feb 28, 2014), with year-over-year improvement in revenues and earnings. The company recorded earnings per share from continuing operations of $3.15, beating the Zacks Consensus Estimate of $3.09 by 1.9%. Reported earnings were also more than $2.74 earned a year ago.

Revenues: Second-quarter revenues of $5,832.0 million were marginally below the Zacks Consensus Estimate of $5,855.0 million. However, revenues increased 6.6% year over year.

On a segmental basis, revenues from Seeds and Genomics increased 7.0% year over year to $4.6 billion. The increase was the result of improvement in the corn and soy businesses. Revenues from Agricultural Productivity increased 5.2% year over year to $1.2 billion buoyed by favorable demand.

Cost & Margins: Monsanto's gross profit margin was 59% compared with 56% recorded in the year-earlier quarter. Operating expenses were recorded at $1,029.0 million, higher than $958.0 million in the year-ago quarter.

In the reported quarter, selling, general and administrative, and research and development expenses, as a percentage of net sales, were recorded at 11.0% and 7.0%, respectively.

Balance Sheet/Cash Flow: Exiting fiscal second-quarter 2014, Monsanto's cash and cash equivalents were approximately $3.8 billion compared with $4.5 billion at the end of fiscal first-quarter 2014. Long-term debt was roughly flat with the prior quarter at $3.1 billion.

In the six months ending Feb 2014, cash flow from operations was $1.8 billion, roughly flat year over year. Total capital spending was roughly $471.0 million against $261.0 million spent in the half year ended Feb 2013.

In the reported quarter, the company spent roughly $203.0 million on share repurchase.

Outlook: Based on the improved performance, management reaffirmed its expectations for fiscal 2014. Earnings per share are expected in the range of $5.00 to $5.20. On an as-reported basis, the company expects to earn $5.02 to $5.22 per share.  However, the company also expects to experience 15 to 20 cents headwinds from foreign currency impacts.

Management also reaffirmed free cash flow in the range of $600.0 to $800.0 million. Cash flow from operating activities is projected in the range of $2.9 to $3.3 billion. Moreover, cash required for investing activities are expected within $2.3 to $2.5 billion. 

Other Stocks to Consider

Monsanto currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include CVR Partners, LP UAN, The Scotts Miracle-Gro Company SMG and International Flavors & Fragrances Inc. IFF. All these stocks have a Zacks Rank #2 (Buy).