What UBS Analysts Are Doing At Monsanto

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In a report published Monday, UBS analysts maintained a Buy rating on
Monsanto Company
MON
, while reducing the price target from $133 to $131. In the report, UBS noted, "MON & petchems have had minimal F/X since corn & oil are USD-based globally. We can't remember the last time that either Dow Chemical or Monsanto had EPS reductions on F/X." "Although polyethylene (for DOW) & corn seed (MON) are sold in local currency, pricing typically adjusts for F/X before it becomes significant to EPS. Polyethylene prices adjust monthly. And F/X typically doesn't change much over the few months that corn seed is sold prior to the planting season, & MON actually sells in USD in some countries like Argentina," the analysts commented. "However, macros have been so volatile that DOW guided to a modest F/X headwind earlier, & now we're modestly reducing MON's EPS," the report added. "Citing Monsanto Company as the "largest controllable costs in our coverage (after ECL)", the analysts said that modest headwinds could be "offset with cost controls." They added, however, that "the steep FX moves in Brazil & Europe, & even larger FX move in smaller Ukraine" had become "too much to fully offset." "We believe MON has as deep a new product pipeline as ever, with keys being the first dual herbicide tolerant soybeans for weed resistance control, non-GMO microbial pest control products, & precision agriculture services," the analysts wrote. The EPS estimates for FYAug15 and FYAug16 have been reduced from $6.00 to $5.90 and from $7.00 to $6.90, respectively, to reflect the F/X impact.
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Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsUBS
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