Monsanto (MON) Tops Q4 Earnings, Bayer's Buyout Deal On Track

Monsanto Company (NYSE:MON) reported better-than-expected results for fourth-quarter fiscal 2017 (ended Aug 31, 2017).

Earnings

Quarterly adjusted earnings from ongoing business came in at 20 cents per share, as against the Zacks Consensus Estimate of a loss of 38 cents per share. The bottom line also came in higher than the year-ago tally of 7 cents per share.

Adjusted earnings from ongoing business came in at $5.50 per share in fiscal 2017 compared to $4.48 per share recorded in the year-ago period.

Revenues

During the reported quarter, Monsanto generated revenues of $2,686 million, up 4.8% year over year. In addition, the top line comfortably surpassed the Zacks Consensus Estimate of $2,411 million.

On a segmental basis, revenues from Seeds and Genomics were up 11.6% year over year to $1,747 million. However, revenues from Agricultural Productivity dipped 5.8% year over year to $939 million.

Revenues for fiscal 2017 came in at $14,640 million, as against $13,502 recorded in the year-ago period.

Cost & Margins

Monsanto’s cost of sales decreased 5.5% year over year to $1,346 million during the reported quarter. Gross profit margin expanded 440 basis points (bps) to 49.9% during the quarter.

Operating expenses during the quarter came in at $1,403 million, flat year over year. Interest expenses were $114 million, up 9.6% year over year.

Gross profit margin for fiscal 2017 came in at 54.2%, advancing 220 bps year over year. Operating expenses for fiscal 2017 were $4,725 million, up 1.8% year over year.

Balance Sheet and Cash Flow

Exiting fiscal 2017, Monsanto had cash and cash equivalents of $1,856 million, higher than $1,676 million recorded at the end of fiscal 2016. Long-term debt was $7,254 million, as against $7,453 million recorded on Aug 31, 2016.

In fiscal 2017, Monsanto generated net cash of $3,226 million from operating activities compared with $2,588 million recorded in the year-ago period. Capital spending flared up 34.3% year over year to $1,240 million.

Outlook

Monsanto is poised to grow on the back of innovative technology adoption, strategic restructuring moves and improved pricing of major products such as glyphosate and Intacta RR2 PRO soybeans. By the end of fiscal 2018, the company anticipates to complete its ongoing cost-saving and restructuring initiatives which commenced in fiscal 2015.

Bayer Deal Prospects

Monsanto believes Bayer AG’s (OTC:BAYRY) buyout deal will likely open up a number of opportunities for its business.

Bayer’s distinct crop protection portfolio, when combined with Monsanto’s popular Climate FieldView and Seeds & Traits platform, is anticipated to give rise to a highly competitive seeds traits and agricultural chemicals behemoth in the industry.

The largest all-cash deal ($66 billion), which awaits regulatory approvals, is anticipated to close by the end of calendar year 2017.

Stocks to Consider

Better-ranked stocks in the same space are listed below:

Agnico Eagle Mines Limited (NYSE:AEM) currently carries a Zacks Rank #2 (Buy) and has an average positive earnings surprise of 52.94% for the last four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Air Products and Chemicals, Inc. (NYSE:APD) also holds a Zacks Rank #2 and has an average positive earnings surprise of 1.77% for the same time period.

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