Monsanto (MON) : Valuation and Ethics of BioEngineering Message Board

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Non-Tech : Monsanto (MON) : Valuation and Ethics of BioEngineering

MON 127.95

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Jun 8 5:00 PM EST

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From: Dennis Roth	3/6/2008 9:01:50 AM
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Monsanto Co. (MON): Five key takeaways from headquarters' visit - Goldman Sachs - March 06, 2008 What's changed Following our recent visit to St. Louis, we came away more confident that Monsanto is a stock to own now following its recent pullback. The trifecta of more market share gains in both national (Dekalb) and regional brands (ASI), more biotech penetration (triple-stack is still the must-have product for corn farmers in the cornbelt) and higher trait prices should help Monsanto grow its earnings significantly in FY2008. An extra kicker comes from the sharp increase in Roundup prices that are up in some markets nearly 75% compared to December 2006 levels. Reflecting the strong operating environment, we are raising our FY2008 EPS estimates by $0.10 to $2.95 and FY2009 EPS by $0.05 per share to $3.65 per share. Implications While there will be some switching from corn to soy in 2008 (our estimates are for 86-89 million corn acres), we believe recent anxiety about the switch is overblown as each 1 million acres shift from corn to soy hits Monsanto’s EPS by just ~$0.01 per share. This is because essentially every soy acre uses a Roundup trait, while corn trait penetration is lower. In our view, the story for 2008 is less about soy vs. corn but more about trait penetration, market share gains and pricing in traits and Roundup. We expect Monsanto to stay true to its recipe for success: newsflow and upside earnings surprises. Accordingly, our $2.95 estimate for FY2008 is above current guidance of $2.70-$2.80. With a very healthy ag cycle that’s independent of broader economic trends, new untapped markets such as Brazil starting to open the door for biotech and, more importantly, with Monsanto staying several steps ahead of its competitors with a rich advancing pipeline, we believe there is still substantial upside to the story. Valuation Our 12-month price target of $135 is based on 35-40x FY2009E EPS. Key risks Lower agricultural commodity prices.

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