Monsanto Earnings Preview: Momentum Expected to Continue

Monsanto MON is scheduled to report third-quarter fiscal 2011 results Wednesday morning. Investors will be looking to see if the momentum continues after a strong first half, which included a boost to its free cash flow guidance for the full-year, driven by a strong economic climate in agriculture. Analysts anticipate that the biotech company will announce earnings of $1.11 per share, which is up from $0.81 per share in the same quarter of last year. The consensus estimate was the same 30 days ago. Note that analysts have underestimated Monsanto earnings in three of the past four quarters. The beat was by 3 cents per share in the second quarter. The EPS forecast for the full year so far calls for an increase of 14.8% year-over-year to $2.83. Revenue Expectations During the three months that ended in May, Monsanto announced a $300 million debt offering and received regulatory approval for its Genuity SmartStax RIB Complete product. The revenue forecast for that period calls for an increase of 14.2% from the same quarter of last year to $3.4 billion. Analysts also are looking for slower revenue growth for the current quarter—4.8%. So far, the full year forecast calls for $11.4 billion, an 8.3% increase from a year ago. The Company St. Louis-based Monsanto provides agricultural products. Its Seeds and Genomics segment produces grain and vegetable seeds with biotechnologic traits that help farmers control insects and weeds. The Agricultural Productivity segment produces herbicides for agricultural, industrial and lawn-and-garden application; Roundup, its flagship product, is the world's number one herbicide. Performance The long-term earnings per share growth forecast is 15.1% and the dividend yield is 1.7%. But the 25.2 P/E ratio and 1.4 PEG ratio suggest the stock is no bargain. Still, analysts on average recommend buying MON and have for the past 60 days. Their mean price target (where they expect the stock to go) is currently $75.17 per share. But shares have traded mostly between $65 and $70 since early March and closed Monday at $65.72. While the stock has underperformed the broader markets year to date, it has outperformed the agricultural chemicals industry average.