Monsanto Posts Upbeat Q1 Earnings, Maintains Outlook

Monsanto Company (MON - Analyst Report) reported better-than-expected bottom-line results for first quarter of fiscal 2015 (ended Nov 30, 2014). The company reported adjusted earnings of 47 cents per share, above the Zacks Consensus Estimate of 34 cents. However, results came 29.9% below the year-ago earnings of 67 cents.



Monsanto generated revenues of $2,870 million in the quarter, down 8.7% from $3,143 million recorded in the year-ago quarter and lower than the Zacks Consensus Estimate of $2,956 million.

On a segmental basis, revenues from Seeds and Genomics decreased 3.3% year over year to $1,621 million. Gains recorded in Soybean seed and traits business were more than offset by weak performances in Cord seed and traits, Cotton seed and traits, Vegetable seeds and Other businesses.

Revenues from Agricultural Productivity declined 14.9% year over year to $1,249 million.

Cost & Margins

Monsanto’s cost of sales fell 7.7% year over year, representing 50.8% of total revenue versus 50.3% in the year-ago quarter. Gross margin inched down 50 basis points to 49.2%.

Operating expenses were recorded at $992 million, down 0.6% from the year-ago quarter, reflecting 34.6% of total revenue. Interest expense soared 117% to $115 million.

Balance Sheet and Cash Flow

Exiting fiscal first-quarter 2015, Monsanto’s cash and cash equivalents increased to $3.1 billion from $2.4 billion at the end of fiscal fourth-quarter 2014. Long-term debt remained stable sequentially at $7.5 billion.

In the quarter, Monsanto generated cash of $1.3 billion from its operating activities, down from $1.7 billion recorded in the year-ago quarter. Capital spending grew 14.5% year over year to $347 million. Dividend payments in the quarter totaled $238 million.

Free cash flow soared 112% year over year to $969 million.

Outlook: For fiscal 2015, Monsanto maintained its adjusted earnings guidance in the range of $5.75−$6.00 per share. For the second quarter, the company anticipates adjusted earnings per share to be down nearly 5−10% year over year due to lower U.S. corn acres.

Monsanto revised down its gross profit growth expectation for the Seed and Genomics segment to the high single-digits range versus the double-digits range expected earlier. Gross profit in the Agricultural Productivity segment is estimated to decline around 10%. Base operating spending is anticipated to range from flat to slightly down in the year.

Cash flow from operating activities is projected to be $3.2−$3.6 billion while cash required for investing activities amounts to $1.2−$1.4 billion. Free cash is expected to come within $2.0−$2.2 billion.

With a $56 billion market capitalization, Monsanto currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Gruma S.A.B. de CV (GMK - Snapshot Report), Cosan Ltd. (CZZ - Analyst Report) and Marrone Bio Innovations, Inc. (MBII - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).

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