Monsanto Raises Forecast as Profit Tops Estimates on Corn
Monsanto Co. (MON), the world’s largest seed company, raised its full-year earnings forecast and reported second-quarter profit that exceeded analysts’ estimates as an early U.S. spring boosted corn plantings.
Net income rose 19 percent to a $1.21 billion, or $2.24 a share, in the three months through February, from $1.02 billion, or $1.88, a year earlier, St. Louis-based Monsanto said today in a statement. Earnings excluding legal costs were a record $2.28, topping the $2.12 average of 17 analysts’ estimates compiled by Bloomberg.
Monsanto said it will earn $3.49 to $3.54 a share in the 12 months through August, a 10-cent increase from the company’s January forecast. The average estimate of 19 analysts was $3.52. Second-quarter revenue rose 15 percent to $4.75 billion.
Chief Executive Officer Hugh Grant said on a conference call that he expects to gain market share in U.S. corn seed for a second year as farmers buy more SmartStax, which has eight genetic changes enabling it to tolerate herbicides and kill bugs. Sales in the quarter benefited from warm U.S. weather that is leading to early orders, Monsanto said.
“They have a lot of things going right for them: corn acreage, weather, strong crop prices,” Chris Shaw, an analyst at Monness Crespi Hardt & Co. who recommends selling the shares, said today in a telephone interview. “The largest beat in my model was corn seed.”
Monsanto fell 1.5 percent to $80.58 at the close in New York.
Profit in the six months through August may be unchanged from a year earlier because early plantings shifted some sales and royalty payments into the first half, Chief Financial Officer Pierre Courduroux said on a conference call.
“We expect overall earnings for the second half of the year to be effectively flat,” Courduroux said. “The first-half results largely capture the growth we expect to reach in our full-year guidance.”
Monsanto raised its full-year forecast for free cash flow by $300 million to $1.6 billion to $1.8 billion. In the second quarter, sales of seeds and genetic licenses rose 15 percent as farmers in the U.S. and Latin America increased purchases of corn, the largest unit, Monsanto said. Gross profit from seeds climbed 17 percent as gains in corn, soybeans and cotton outpaced a Europe-led decline in vegetable seeds.
Grant said today most of the seed supplies from winter nurseries in Latin America have arrived in the U.S. and will allow the company to meet demand, unlike some of its smaller competitors.
Farmers may plant 95.864 million acres with corn, a 4.3 percent increase from last year and the biggest corn crop in 75 years, the Department of Agriculture said March 30. At current prices, farmers in some parts of the Midwest can make more than twice as much from an acre of corn as from soybeans, according to AgStar Financial Services ACA in Rochester, Minnesota.
The U.S. and corn in particular will drive profit growth this year, Courduroux said. Soybean gross profit may fall because of lower sales in Brazil, and vegetables-seed earnings may drop because of a decline in European sales, he said.
U.S farm net income may be $91.7 billion this year, the second-highest total on record, according to the USDA. Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.
Monsanto got 54 percent of its revenue from the U.S. in fiscal 2011, according to data compiled by Bloomberg.
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