Monsanto Sets the Bar High for 2012
Jan 5th 2012 11:15AM
Updated Jan 5th 2012 4:06PM
Monsanto's (NYS: MON) first-quarter earnings are in, and things are looking strong. Outperforming in nearly every way, the occasionally controversial seed company rode strong South American sales to 33% higher revenue than the year-ago quarter. EPS clocked in at $0.23 per share, handily smashing early estimates of $0.16 per share and besting its own top-end prediction of $0.20 per share. This all adds up to major momentum for a highly seasonal company now rolling into its largest sales periods.
Seeds of growth
Two of Monsanto's critical growth sectors were corn seeds and agricultural productivity, which includes pesticides and herbicides. Corn saw 46% growth over the prior year, and agricultural productivity sales were up by 34%. The segments are Monsanto's largest as a percentage of total sales, but cotton seeds also saw explosive sales growth, up 73% from last year. With corn futures not far off all-time highs, expect this segment to remain in high demand through the year (barring any commodity price collapse).
Pushing into Latin America is a way to offset weak off-season periods in the Northern Hemisphere, and should help the company maintain its technological lead through more consistent earnings. Monsanto is doing very well in research, boasting 14 advancements across a variety of developments, a stated record.
A rising tide
As one of the market's major agricultural bellwethers, Monsanto's outperformance should lift a handful of well-positioned fertilizer companies. Look for CF Industries (NYS: CF) as one of the biggest beneficiaries -- its focus on nitrogen fertilizer puts it on the right side of a growing trend, as Fool analyst Jim Mueller points out.
CVR Partners (NYS: UAN) is also substantially ramping up its production to meet farmers' high demands this year. Its current yield of 9.7% puts it in a very elite group, alongside Terra Nitrogen (NYS: TNH) , which is majority owned by CF Industries and sports a 9.2% yield. Terra is also heading into the planting season with a bullish outlook.
People won't stop eating anytime soon, and continued growth in both commodity and fertilizer prices ought to keep the industry in bloom throughout the year. Keep your eye on these companies -- add them to your Watchlist now for all the important news and analysis you need.
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At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter for more news and insights. Motley Fool newsletter services have recommended creating a synthetic long position in Monsanto. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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