Will Monsanto (MON) Miss Earnings Estimates? - Analyst Blog

Agricultural chemicals company Monsanto Company MON is scheduled to release its second-quarter fiscal 2014 results before the opening bell on April 2. In the last quarter, the company delivered a positive earnings surprise of 6.35%. Let's see how things are shaping up for the company prior to the announcement.

Factors to Consider

Monsanto reported improved year-over-year results in the first quarter of fiscal 2014. Adjusted earnings per share increased to 67 cents in the quarter from 62 cents in the year-ago quarter. The 7% year-over-year hike in revenues to $3.1 billion resulted from the launch of products and inorganic growth. However, the continuous product launches increases the company's expenses. In the first quarter of fiscal 2014, the company experienced a 12.4% year-over-year increase in operating expenses. These expenses are expected to continue increasing thereby affecting margins.

Additionally, the foreign operational hazards including changes in local, political or economic conditions; governmental policies and pricing directives; as well as import and trade restrictions in foreign economies add to the peril.

Earnings Whispers

Our proven model does not conclusively show that Monsanto is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as we see below.

Zacks ESP: Monsanto's Most Accurate estimate stands at $3.01, while the Zacks Consensus is pegged slightly higher at $3.10. Hence, the Earnings ESP is -2.90%.

Zacks Rank: Monsanto has a Zacks Rank #4 (Sell) which lowers the predictive power of ESP. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Monsanto witnessed downward movement of estimates in the past 30 days for the upcoming quarter as well as for fiscal 2014.

Other Stocks to Consider

Here are some other companies in the industry that investors may want to consider on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

The Scotts Miracle-Gro Company SMG, Earnings ESP of +0.51% and a Zacks Rank #2 (Buy).

Agrium Inc. AGU, Earnings ESP of +3.77% and a Zacks Rank #3 (Hold).

Limoneira Company LMNR, Earnings ESP of +7.69% and a Zacks Rank #3.