(New throughout, adds analyst comment, details))
By Carey Gillam
June 25 Monsanto Co reported a 6 percent
drop in quarterly profit on Wednesday, but shares jumped more
than 5 percent as the world's largest seed company beat
forecasts, improved its near-term outlook and said it planned to
double earnings over the next five years.
The company, known for its genetically engineered corn,
soybeans and other crops as well as the popular Roundup
herbicide, also announced authorization of a $10 billion share
repurchase and cited strong progress on a new farm data business
Monsanto said that although earnings for the third quarter
ended May 31 were down in the face of challenging market
conditions, the overall outlook was bright.
"We're on track for seeds and traits to drive a majority of
our full year growth," said Chairman Hugh Grant. "That
performance in a more challenging agricultural environment
speaks to the breadth and customer value of our product
Grant said that by the end of fiscal 2019, the company aimed
to at least double full-year ongoing earnings, which exclude
certain special after-tax items. More than $4 billion of total
gross profit growth will come from its core seeds and traits
unit, the company said.
The company also raised the low end of its full-year outlook
for ongoing earnings to $5.10 a share from $5.00 while keeping
the high end at $5.20.
"The confidence level is off the charts," said John Roberts,
executive director of U.S. chemical equity research at UBS.
"They feel they have as deep a growth pipeline as they've had in
a long time."
Monsanto said it had earned $858 million, or $1.62 a share,
in the third quarter. That was down from $909 million, or $1.68
a share, a year earlier, but it beat the average forecast of
$1.56 a share from analysts surveyed by Thomson Reuters I/B/E/S.
Corn seed products, the company's largest revenue source,
will remain a growth driver, the company said. Corn contributed
$1.3 billion this quarter to total net sales of $4.25 billion.
The company said the outlook for its glyphosate-based
Roundup herbicide business was flat to lower going forward.
Monsanto said one of its most important areas of progress
was with its new farm data business unit, The Climate Corp. The
company has signed collaborations with retail partners, and
expects penetration on more than 40 million U.S. acres using its
basic farm data tool and more than 1 million acres using a
"This platform is demonstrating that it can be the
integrator, bringing together decisions around how the farmer
manages his land, his seed choices, his crop protection choices,
his fertility programs, his equipment, etc..," said Monsanto
President Brett Begemann.
Monsanto would not provide near-term revenue estimates for
Climate Corp, but has said it will be a "meaningful"
contributor. Roberts estimated revenue could hit $1 billion by
2018. Anything less would not likely be "meaningful" to
Monsanto, he said
The company said a priority is pursuing external growth
opportunities, including technology investments and potential
mergers and acquisitions.
Monsanto shares rose more than 5 percent and were trading at
$126.78 at 12:58 p.m. EDT (1658 GMT).
(Reporting by Carey Gillam in Kansas City; Editing by Lisa Von
Ahn, Meredith Mazzilli and David Gregorio)