Monsanto's shares rally as profit surges. Latin America helps drive 36% quarterly revenue growth.
NEW YORK (MarketWatch) -- Monsanto Co. shares hit an all-time high Thursday, rallying as the agricultural company raised its earnings outlook for fiscal 2008 and reported having nearly tripled its first-quarter profit.
The strong results are thanks in part to robust demand in Latin America for Roundup herbicide and seed trait products, the St. Louis-based company's results showed. For 2008, Monsanto expects sales of Roundup to exceed $1 billion versus $854 million last year.
Shares of Monsanto (MON:monsanto co new com recently changed hands at $119.28, up more than 7%. The stock has more than doubled from a year ago and struck an intraday high earlier of $120.04, beating a previous all-time best of $116.25 set Dec. 27.
"The quarter was spectacular," said Charlie Rentschler, analyst with the investment firm Wall Street Access. Furthermore the improvement in quarterly cash flow -- at $996 million compared with $600 million last year -- indicated plenty of prepayments from U.S. corn farmers.
"While the U.S. season is still in front of us, early indicators are positive and are also a factor in our decision to raise guidance for the full year," Chief Financial Officer Terrell Crews said on a post-earnings conference call.
Monsanto raised its earnings outlook for fiscal 2008 to $2.50 to $2.60 a share, up from a prior view of about $2.40 a share. Analysts polled by Thomson Financial are looking for, on average, earnings of $2.59 a share.
For the three months ended Nov. 30, the St. Louis-based company said it earned $256 million, or 46 cents a share, compared with $90 million, or 16 cents a share, in the year-ago first quarter. The Wall Street consensus was for earnings of 35 cents a share in the recent quarter.
"Our results in the first quarter represent a solid start to the fiscal year and highlight the strong performance of our Latin American business," said Chief Executive Hugh Grant.
Total sales for the latest quarter rose to $2.1 billion from $1.54 billion, on the back of robust Roundup sales in Brazil and Argentina as well as greater adoption of its seed traits that help protect crops from pests while providing greater yields. Herbicide sales to Europe also helped, Monsanto said.
Analysts had been looking for first-quarter sales of $1.89 billion, on average.
Monsanto said its Roundup product has been so popular with farmers that it's considering capital projects to expand its production facilities.
"Demand of China for grain is growing, and as the interim U.S. [agriculture] secretary recently shared, the U.S. now expects to export more agricultural goods to China than to Europe in the coming year," CEO Grant said. "Coupled with exports is the continued demand for biofuels, which has been reinforced with the recent changes to the U.S. renewable fuel standards."
Shares of Monsanto rival Syngenta AG (SYT:syngenta ag sponsored adr
Monsanto noted that higher corn commodity prices are driving growth in plantings in Brazil to about 35 million acres. Currently, about 28 million acres use hybrid seeds, the company said.
"Recent estimates also suggest that soybean production in the country could be slightly higher than last season as well, or slightly higher than the 50 million acres planted last year," the company said.
"Additionally in Argentina, with expanded corn acreage and the first sales of our recently improved doublestack, our corn trait sales have made a larger contribution than in previous years," CFO Crews said.
Monsanto also noted in a separate news release that its research-and-development pipeline volume was currently one of the company's largest, including SmartStax corn, disease-resistant soybean, second-generation high-oil soybeans, high-stearate soybeans, and high-oil corn.
The agricultural industry has been benefiting from new demand in biofuels, which has increased crop commodity prices and encouraged the planting of additional acreage.
"In an equity market struggling with the implications of slowing economic activity in the U.S. and possible recoupling abroad, we believe the Ag sector offers an exciting alternative, and once again Monsanto has set the bar high for execution," said Goldman Sachs analyst Robert Koort. The investment firm maintained a $112 price target for the stock while and a neutral rating.
Monsanto has also been buying up its stock, with $49 million repurchased in the recent quarter. To date, the company has bought a total of $360 million, or 45%, of its $800 million buyback plan intended to be completed by October 2009.
In November, sector bellwether Deere & Co. (DE:Deere & Company
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