Some articles of late on this name for those unfamiliar with the company:
1. Monsanto's Corn Crazy
- Tuesday’s announcement from Monsanto, the seed company, that it will build a new processing plant and expand another in order to double corn seed production, shows that the ethanol frenzy isn’t over yet.
- The company plans a $155 million expansion to its existing operation in Kearney, which will add 55 full-time jobs and 2,000 part-time jobs. A new 145-acre processing plant will also be built in York County about 40 miles west of Lincoln, Neb. Construction of the new facility and expansion of the current production is expected to be finished by the end of 2009.
- The new additions to the Kearney facility are estimated to boost overall production by more than 30%.
- The St. Louis-based company's third-quarter profit skyrocketed more than 70% on strong, consensus-beating sales of corn seed and herbicide. Net income, the company said, totaled $570.0 million, or $1.03 per share, versus $334.0 million, or 60 cents per share, from the year-ago period. Profit from continuing operations came in at $565.0 million, or $1.02 per share, up 75.5% from $322.0 million, or 58 cents per share, a year ago.
- Although there’s no question that while the ethanol industry as a whole has over-expanded, Mark R. Gulley an analyst at Soleil-Gulley & Associates said it doesn’t affect corn seed producers.
- Gulley said that Monsanto has already talked about the need for additional seed production capacity in the United States. “What is more significant is that Monsanto continues to gain market share in corn seed,” Gulley said. “It’s a big ticket expansion for a seed company and what it further says is that they plan to continue to gain market share.”
- Monsanto's market share for its Dekalb brand is 24%, while DuPont (DD)'s Pioneer unit has 30% market share and Syngenta (nyse: SYT)'s three seed brands have a 12% share. A gain in market share for Monsanto will "raise the ante for competitors," Gulley said.
- Monsanto Co., a producer of seeds and the Roundup weed killer, reports its fiscal fourth-quarter results on Wednesday. The following is a summary of key developments and analyst commentary related to the period.
- Monsanto has said it may triple the amount of farming acres planted worldwide with its genetically-engineered seeds.
- The company also has a product in development, called SmartStax, which the company hopes will boost market share abroad.
- Monsanto and Dow AgroSciences are developing and marketing SmartStax, a new corn seed more resistant to bugs and weeds, and hope to have the product on the market by the end of the decade.
- For the quarter, analysts polled by Thomson Financial expect a loss of 18 cents and sales of $1.66 billion.
- Monsanto expects to post an adjusted profit of $2 per share for fiscal 2007, up from a prior range of $1.75 to $1.80 per share. Analysts, who typically exclude one-time items, have projected the company will earn $1.98 per share for the year.
- Jefferies & Co. analyst Laurence Alexander said Monsanto may provide a conservative fiscal 2008 outlook between $2.30 per share and $2.50 per share. Analysts polled by Thomson Financial expect earnings of $2.45 per share for the period.
- Alexander said the conservative outlook may present a nice entry point before the company's investor day on Nov. 8, given continued long-term growth opportunities. "We would view a dip on a conservative fourth-quarter call as a buying opportunity ahead of the investor day," Alexander wrote in a client note.
- Alexander has a "Buy" rating on the stock and $100 price target, which implies upside of nearly 14 percent to Monday's $87.77 closing price.
- Banc of America Securities analyst Kevin W. McCarthy said the implied loss in its "seasonally weak" fourth quarter is "excellent, given estimated earnings per share dilution of 7 cents associated with the recent acquisition of Delta and Pine Land."
- McCarthy raised his 2007 earnings per share estimate to $2 from $1.82 to account for higher-than-expected early season sales of corn seed in Brazil and Argentina and better-than-expected pricing for Roundup herbicide.
- Last week, Soleil Securities Group analyst Mark Gulley hiked his price target to $100 from $92, upbeat on prospects in its international market for seeds and traits. "We believe Monsanto is bigger, faster and smarter than consensus thinks," Alexander wrote in a client note.
Takeaway: Again, I really really really like this sector, for the near, medium, and long run. However, I still like bargains if one can find it, and when you compare valuations of Mosaic (MOS) vs Monsanto (MON) - even if they are totally different companies, you see a heck of a discrepancy. However, the conventional wisdom is to just buy market leaders at any price and since so many mutual funds tend to do that, you can usually tag along with that methodology as well and do fine. Main thing is "get the trend right". Hopefully at some point, Monsanto takes a spill, allowing a more favorable entry point but apparently everyone is pushing it to $100, so in this market of see no evil, hear no evil, $100 must be the destiny. Remember, your tax dollars are going to big corporate farms, which are going to Monsanto ... so one way to get a tax 'rebate' if you will is to have a stock that appreciates from your hard earned tax dollars going to farms harvesting a crop at all time highs. ;) Yes it's ludicrous, but it's America. (or Cramerica) ;)
Long Mosaic in fund; no personal position
