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Monsanto (MON) Range Bound Due To Lack Of Visibility - Piper Jaffray

April 7, 2016 7:19 AM EDT
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Price: $10.07 --0%

Rating Summary:
    12 Buy, 13 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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PiperJaffray analyst, Brett Wong, reiterated his Overweight rating on Monsanto (NYSE: MON) after the 2Q report but also believes that investors questioning whether Monsanto will be able to reach mid-teen EPS growth next year if grain prices remain at current levels will weigh on the stock, keeping the multiple compressed and the stock range-bound until visibility into FY17 improves in the fall. No change to $95 PT.

Monsanto reported largely in-line 2Q (Feb ending) results where ongoing EPS of $2.42 was in-line with management’s pre-release range and with Street expectations. Revenue was modestly lower than the Street as Seed and Genomics (specifically corn and soybeans) as well as Ag Productivity revenue fell short of expectations. Overall lower soybean volumes, more pronounced corn and soybean discounting (granted trait downgrading did not occur as our checks suggested), higher corn COGS, and lower glyphosate pricing, offset higher Intacta acres of 35M (an incremental 5M more than expected), corn price lifts in BRL and lower operating costs. The EPA comment period opened last week for over the top dicamba application, which is expected to be approved for the 2017 crop season, and we expect strong demand going from the expected 3M acres this year to at least 15M acres next year – the 3M this year is driven by demand for new soybean genetics with Xtend despite not being able to apply dicamba over the top.

Management continues to believe that Seed & Genomics gross profit for the year will be up y/y supported by expected trait licensing agreements in the range of $300M- $450M in total. Ag Productivity gross profit guidance was reiterated in the range of $900M-$1.1B for the year with potential risk to volumes, while prices seem to be stable. Management reiterated FY16 ongoing EPS in the range of $4.40-$5.10 with FX still a significant headwind and reaffirmed full-year FCF guidance of $1.4B-$1.6B. Cost reductions remain on track with previous expectations to offset Xtend launch costs.

For an analyst ratings summary and ratings history on Monsanto click here. For more ratings news on Monsanto click here.

Shares of Monsanto closed at $87.00 yesterday.



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