Monsanto Still Underappreciated by Market
The company's not getting credit for its long-term innovation-driven growth prospects.
Monsanto's (MON) fiscal second-quarter results held few surprises. As expected, the company continues to battle several headwinds, including compressed grower margins caused by languishing crop prices, competitor discounting, Argentine currency devaluation, and lower glyphosate pricing. Taken together, these factors are likely to push Monsanto's fiscal 2016 earnings per share below the fiscal 2015 level, an unfamiliar situation for a company that has experienced steady profit growth over the past five years. With management leaving its 2016 EPS guidance intact and no change to our long-term outlook, we are holding our $120 fair value estimate and wide moat rating steady.
Past fiscal 2016, we think Monsanto's growth is set to reaccelerate, as we see this year as only a hiccup for a wide-moat company and clear leader in crop biotechnology. Our long-term outlook assumes crop prices, relevant currencies, and glyphosate pricing will stabilize near current levels, with incremental growth for Monsanto driven not by improvement in these outside (and uncontrollable) factors, but rather by the continued monetization of the company's innovative product lineup and pipeline.
Jeffrey Stafford does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.