Monsanto Q4 Up on Revenue, but Lags Estimates

Monsanto Company (MON) reported improved year-over-year results for fourth-quarter fiscal 2014 (ended Aug 31, 2014). Loss per share came in at 27 cents, down compared with a loss of 47 cents in the year-ago quarter. However, the bottom-line result was worse than the Zacks Consensus estimate of a loss of 24 cents.

The improvement was driven by the company’s global seeds and traits business.

For fiscal 2014, Monsanto reported earnings of $5.23 per share, increasing 14.7% from $4.56 in fiscal 2013 and a cent above the Zacks Consensus estimate of $5.22.

Revenues

Monsanto generated revenues of $2,630 million in the fourth quarter, increasing 19.4% year over year and above the Zacks Consensus Estimate of $2,415 million.

On a segmental basis, revenues from Seeds and Genomics rose 16.1% year over year to $1,376 million. Revenues from Agricultural Productivity increased 23.3% year over year to $1,254 million.

For fiscal 2014, revenues amounted to $15.9 billion, up 6.7% year over year and above the Zacks Consensus Estimate of $15.7 billion.

Cost & Margins

Monsanto’s cost of sales in the fourth quarter increased 9.3% year over year, representing 53.1% of total revenue versus 58% in the year-ago quarter. Gross margin grew 490 basis points (bps) to 46.9%.

Operating expenses were recorded at $1.4 billion, up 14.6% from the year-ago quarter, reflecting 52.9% of total revenue. Interest expense soared 130.6% to $113 million.

Balance Sheet and Cash Flow

Exiting fiscal fourth-quarter 2014, Monsanto’s cash and cash equivalents increased to $2.4 billion from $1.9 billion at the end of fiscal third-quarter 2014. Long-term debt stood at $7.5 billion as against $3 billion in the previous quarter.

In fiscal 2014, Monsanto generated cash of $3.1 billion from its operating activities, up 11.5% year over year. Capital spending was roughly $1 billion as against $0.7 billion in fiscal 2013.

The company distributed cash dividends of $904 million in fiscal 2014.

Outlook: For fiscal 2015, Monsanto anticipates earnings in the range of $5.75−$6.00 per share.

Gross profit in Seed and Genomics segment is expected to grow in double-digits while that in the Agricultural Productivity segment is expected to decline around10%.

Cash flow from operating activities is anticipated to be $3.2−$3.6 billion while cash required for investing activities amount to $1.2−$1.4 billion. Free cash is expected to come within $2−$2.2 billion

With a $56.5 billion market capitalization, Monsanto currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Limoneira Co. (LMNR), The Andersons, Inc. (ANDE) and Bunge Ltd. (BG). All these stocks sport a Zacks Rank #1 (Strong Buy).
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