Monsanto (MON) Tops Q4 EPS by 9c

Monsanto (NYSE: MON) reported Q4 EPS of $0.07, $0.09 better than the analyst estimate of ($0.02). Revenue for the quarter came in at $2.56 billion versus the consensus estimate of $2.38 billion.

GUIDANCE:

Monsanto sees FY2017 EPS of $4.50 - $4.90.

The company noted that its continued focus on return on innovation and cost discipline in 2016 sets up a strong base for growth in 2017, where it expects strong cash flows and growth in EPS. Anticipated gross profit growth in the Seeds and Genomics segment is expected to be driven by increased penetration of soybean technologies and improved soybean costs of goods sold.

The company expects net cash provided by operating activities to be $2.4 billion to $2.8 billion, and net cash required by investing activities to be approximately $1.0 billion to $1.2 billion, assuming the successful sale of the Precision Planting equipment business and a meaningful first year investment in its dicamba production facility. All together, this translates into expected free cash flow of $1.4 to $1.6 billion.

In fiscal year 2017, consistent with its priorities for the year, Monsanto remains focused on the following key areas:

• Growth from Core Seeds and Genomics Segment: The company expects Seeds and Genomics segment gross profit to increase in the mid-single digits as a percent year-over-year, with soybean gross profit alone expected to grow by more than 20 percent. This is expected to be primarily driven by increases in Intacta RR2 PRO and Roundup Ready 2 Xtend soybean penetration and related trait fees, and an anticipated significant reduction in the cost of goods sold related to the launch of Roundup Ready 2 Xtend soybeans. Growth in corn is expected to come from global genetic share gains and germplasm mix lift in local currency. Finally, strategic licensing opportunities are expected to provide an overall contribution of approximately $200 million in 2017, with roughly $60 million assumed in this segment’s gross profit and in the latter half of the fiscal year.
• Strategic Management of Agricultural Productivity Segment: The company expects the Agricultural Productivity segment to deliver $900 million to $1 billion of gross profit, as it remains consistent with its strategy to price slightly above generics. The company also plans to maintain its emphasis on cost discipline and a focus on the construction of the new dicamba facility.
• Business Transformation and Strategic Spend Discipline: The company’s restructuring and cost-savings plans are on-track, with an opportunity to deliver approximately $380 million in annual savings in operating expenses and cost of goods sold at the close of 2017. However, overall operating expenses in 2017 are expected to increase slightly with inflation and the costs associated with the return to growth. This is expected to more than offset the savings from restructuring and cost-savings plans.
• Combination with Bayer: The company reiterated confidence in the timelines to close the deal with Bayer by the end of calendar year 2017.

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

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