Monsanto Set Up For Earnings (MON)

Monsanto Co. (NYSE: MON) is set to report earnings on Wednesday morning pre-market with a conference call to follow at 9:30 AM EST opening bell. 

The seed and agricultural giant is expected to see earnings at $1.34 EPS on $3.71 Billion in revenues.  As next quarter is past the largest growing seasons, First Call actually has a loss estimate of -$0.21 EPS on $1.93 Billion in revenues; and next quarter is the year-end with estimates at $3.39 EPS on $11.41 Billion in revenues.  If the company goes out on a limb and forecasts fiscal Aug-2009, those estimates are $4.22 EPS on $13.13 Billion in revenues.  This is factoring in growth of 24% on earnings per share and growth of 15% in revenues.

So how does this compare with the stock down 3% at $137.75 in mid-day trading?  This gives Monsanto a current year expected P/E of 40.6 and 6.6-times revenues.  For forward estimates of 32.5-times 2009 EPS and 5.75-times 2009 revenues.

Monsanto also only sits a few percentage points from its $145.80 high, yet shares were under $60.00 a year ago and are up 6-fold over the last 4-year period.

Analysts have an average target of nearly $150.00 per share, although there are now higher targets.  It just raised its dividend last week well from $0.175 to $0.24 per quarter.

Options are going to be hard to gage for any reaction expectations because we have so long until JULY expiration date.  But if we had to use a tool of gaging the expected move, it looks like options traders are prepared for a move of nearly $10.00 in either direction.

With this one being a key leader in the two hot markets of agriculture & seed and the strong performance, a "meeting estimates" probably won’t do much to please traders.  Estimates have risen since the end of last quarter.  As recently as the end of may, before it closed on some smaller acquisitions, Monsanto said it was seeking to double its gross profits by 2012.

Other key agriculture and seed issues to consider ahead of Monsanto earnings:

• Monsanto has a huge genetic crop market via the U.N.
• Mosaic wants to unload its Nitrogen venture
• New potash player listed on TSX
• Agrium gave solid news
• S&P raised Mosaic debt ratings

Jon C. Ogg
June 24, 2008