Buybacks Might Not Save Monsanto Earnings

For the full year, Monsanto posted EPS of $5.23 on revenues of $15.86. Consensus estimates called for EPS of $5.21 on revenues of $15.68 billion. For the prior fiscal year Monsanto posted EPS of $4.56 on revenues of $14.86 billion.

Monsanto guided fiscal year 2015 EPS to a range of $5.75 to $6.00 “despite continued industry headwinds and an increase in investments to unlock future growth.” The company projects free cash flow of $2.0 billion to $2.2 billion and net cash from operating activities in the range of $3.2 billion to $3.6 billion.

The company also said that its first-quarter 2015 earnings will be roughly half the size of the comparable period last year. The drop is attributed to a change Monsanto’s full-year earnings pattern, where first-quarter earnings getting smaller and growth getting concentrated in the third-quarter. Second- and fourth-quarter earnings are expected to be approximately equal to last year’s totals. Monsanto expects a “significant uptick in third-quarter earnings reflecting timing shifts and business growth in its largest markets.”

The current consensus EPS estimate for the first quarter is $0.79, compared with $0.67 a year ago. Taking Monsanto’s new guidance, we should expect first-quarter earnings of around $0.33 a share. The current consensus full-year estimate for 2015 is $6.03, slightly above the top end of Monsanto’s estimated range.

Monsanto also spent $7.1 billion on share buybacks during the past year:

In fiscal year 2014, the company used its free cash flow position to return cash to shareowners through buybacks and dividends, including the completion of the company’s $2 billion share repurchase authorization. In June, the company announced a new $10 billion share repurchase authorization, inclusive of a $6 billion accelerated buyback program.

As promised, the company spent about $6.1 billion on share buybacks in the fourth quarter.

Monsanto’s shares were up about 0.3% in premarket trading Wednesday, at $108.50 in a 52-week range of $102.88 to $128.79. Thomson Reuters had a consensus analyst price target of around $138.20 before the report.

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