Monsanto (MON) Raises Guidance (Again)

While the chart is relatively poor, all things considered Monsanto (MON) has held up relatively well compared to its peers in the "commodity" space. I continue to be a bull on the long term market for potash fertilizer and seeds and once the hedge funds are done blowing themselves up we are going to have quite the rally in this group. In fact, while I usually lighten up ahead of earnings, due to the pole axed nature of this group I will actually have quite high exposure going into earnings as I expect a positive news flow and unlike the past 5-6 quarters this group is now hated as opposed to love. That strikes a chord with my contrary eyes.

To that end, Monsanto (MON) raises guidance today. This is another in a series of raises over the past 2 years. The companies in this sector continue to be cash flow monsters. Cash is king, in the end - and it allows you to buyback stock to protect against short sellers. Monsanto north of $114 would strike me as a very positive development; I've stayed away from this name due to valuation but I'd be a buyer on that sort of breakout now that we've culled the portfolio of so many names. Or I'd be interested on a drop to about $90. It's still not "cheap" but if it won't get much "cheaper" in this environment of delevering and angst about all things commodities, it appears it will never get "cheap" - it is a relatively unique company.

• Monsanto Company (NYSE: MON - News) raised its fiscal year 2008 ongoing earnings per share (EPS) guidance to a range of $3.58 to $3.60, and revised its reported EPS guidance to a range of $3.49 to $3.51, compared with its previously announced EPS guidance of $3.37 on an ongoing basis, and $3.63 on an as reported basis The change in ongoing earnings reflected higher-than-expected sales and gross profit in the company's seeds and traits business and its Roundup® and other glyphosate- based herbicide business.
• The change in as reported guidance for the year now reflects the effect of income from discontinued operations, the Solutia settlement and in process research and development from the De Ruiter acquisition. The ongoing EPS represents approximately 80 percent growth over last year's ongoing EPS of $1.99, and last year's reported EPS of $1.79 had even greater growth.

• Monsanto now expects its seeds and genomics segment will generate above $3.8 billion in gross profit for its 2008 fiscal year, up from the earlier expectation of $3.7 billion, representing a growth rate of more than 25 percent compared with 2007 gross profit. The increased expectation for segment gross profit reflects higher than expected sales from the company's corn, soybean and vegetable platforms. Crews will indicate that Monsanto's Roundup® and other glyphosate-based herbicides business is on track to be above $1.9 billion of gross profit for the 2008 fiscal year, ahead of the previous forecast.

• "The fundamentals of agriculture and our businesses are strong and getting stronger," Crews said. "We continue to see strong adoption of our branded seed products, growing use of our trait technologies globally and remain focused on introducing new game-changing technologies for farmers that can increase yields and improve their productivity. We are committed to delivering innovative tools that can deliver value to farmers."

• Crews will also note that for the 2008 fiscal year, the company's corn business should exceed $2 billion in gross-profit generation for the first time. For 2009, Crews will reiterate that Monsanto expects the corn business to grow by 25-30 percent, propelling the company's expanding seeds-and-traits opportunity.

• During Crews's presentation, he will also announce that Monsanto's guidance for free cash for fiscal year 2008 is now at approximately $750 million, compared with previous guidance of $550 million. Higher collections from accounts receivable and customer prepayments contributed to the increase in free cash flow.

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