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Stock Strategist

Headwinds Won't Last for Monsanto

We think the market will eventually appreciate the ag giant's long-term value and growth prospects.

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Although there was a lot to digest in  Monsanto's (MON) fiscal fourth-quarter and full-year results, we're leaving our fair value estimate of $130 per share unchanged. Our wide moat rating is also intact.

We continue to think that Monsanto's shares are trading at attractive levels and that some of the near-term headwinds the company is facing today will eventually subside, allowing the market to appreciate the solid long-term value and growth prospects of Monsanto's industry-leading seeds and genomics business. In the near term, the company is facing headwinds from currency, elevated costs, and lower glyphosate pricing. Although these factors are likely to hold back growth in 2016, we don't think they damage Monsanto's long-term growth prospects. Notably, management is sticking to its long-term target to more than double earnings per share from 2014 to 2019. We think this speaks to the competitive positioning of Monsanto's products and the opportunities for seed technology growth, given necessary yield improvements globally.

Jeffrey Stafford does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.