Monsanto (MON) Misses Q1 EPS by 1c, Offers Outlook

Monsanto (NYSE: MON) reported Q1 EPS of $0.41, $0.01 worse than the analyst estimate of $0.42. Revenue for the quarter came in at $2.66 billion versus the consensus estimate of $2.77 billion.

Fiscal Year 2018 Outlook

The company expects growth in its pretax income for fiscal year 2018, but did not provide specific financial guidance in light of the pending combination with Bayer. The expected growth drivers for Monsanto’s business are continued improvements in pricing for glyphosate, plus the adoption of new technologies in Seeds and Genomics such as INTACTA RR2 PROTM soybeans, Roundup Ready 2 Xtend® soybeans, Bollgard® II XtendFlex® cotton, and new corn hybrids around the world. Gains from recent asset sales are also contributing to growth. The company will remain disciplined as it monitors the evolution of U.S. corn and soybean plantings through the spring.

For Agricultural Productivity, volumes of XtendiMax® Herbicide with VaporGrip® Technology are expected to expand as acreage grows. The company continues to invest in the construction of its dicamba manufacturing plant in Luling, La., slated for completion in 2020.

As communicated previously, the company expects to complete its restructuring and cost savings initiative that began in fiscal year 2015, with the expectation that selling, general and administrative costs and research and development expenses in fiscal year 2018 will be down slightly year over year. Once the initiative is completed, the company expects to realize annual savings of $500 million in fiscal year 2018 as compared to its fiscal year 2015 baseline.

The company noted that benefits related to strategic asset sales and licensing contributions are expected to be about 30 percent below the roughly $350 million pre-tax average annual contribution for the last three years.

In regards to the recent passage of the U.S. tax reform legislation, the company expects it to have a positive impact on the company’s effective tax rate, beginning in fiscal year 2019. For the current fiscal year, the company is still completing a full assessment; early estimates indicate that the effective tax rate should not exceed 30 percent, and has the potential to be materially lower.

(A) Fiscal first quarter 2018 and 2017 seeds and genomics gross profit includes a pretax restructuring charge totaling $10 million and $1 million, respectively, related to certain asset impairment charges, primarily in the soy and corn business, respectively, which is included in cost of goods sold.

(A) EBIT is defined as earnings before interest and taxes. Interest and taxes are recorded on a total company basis. We do not record these items at the segment level.

For earnings history and earnings-related data on Monsanto (MON) click here.

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