In the agribusiness space, Monsanto Company (MON) is one of the largest and most popular companies in the industry. It currently is the world’s leading producer of the herbicide glyphosate and the second biggest producer of genetically engineered seeds. And with a market cap of over $61 billion, investors pay close attention to this bellwether, closely following the company’s news and key earnings report [for more agricultural news and analysis subscribe to our free newsletter].
On Wednesday, Monsanto reported its first quarter earnings report, which managed to beat the Street’s estimates. The company also announced its plans to delve into the agriculture-based information technology business, a move that could prove quite profitable in the coming years.
Monsanto reported earnings of $368 million during its first quarter of FY2014, or $0.69 per share, easily beating last year’s $339 million figure. Analysts had expected EPS to come in at $0.64. The company attributed its 8.6% rise in profits to higher sales in biotech soybean seeds and its signature herbicide, Roundup; soybean sales alone grew 16% to $267 million.
In total, Monsanto sold $1.7 billion worth of seeds and related agricultural traits in Q1, down 5% from the previous year. Corn seed sales, the company’s biggest product, dipped 7% to $1.1 billion. Herbicide sales, however, increased significantly, boosting Monsanto’s agricultural productivity segment to $1.5 billion in net sales. Total revenue for the quarter was reported at $3.1 billion, up from last year’s Q1 revenue of $2.939 billion [see What Big Banks Are Saying About Commodities in 2014].
In its statement, Monsanto also reiterated previous expectations of earnings between $5 and $5.20 per share for fiscal 2014; analysts expected earnings of $5.25 for the year.
This week, Monsanto also announced a new agreement with WinField, a U.S. agricultural distributor, to explore collaborations on agriculture-based information technology. The company took steps to delve further into “precision farming” technology last year after purchasing farm-analytics company Climate Corp in November. With its new acquisition, Monsanto will be able to offer farmers a wide range of tech tools, including individualized weather statistics, that are designed to improve farmers’ crop yields. Analysts believe the farming technology group will significantly change how some farmers operate. The profitability of Monsanto’s latest investments, however, may take several years to realize [see Berkshire's Latest Acquisition: Another Big Oil Bet].
Outside of the tech space, Monsanto also announced that is is closer to launching the world’s first herbicide-tolerant wheat. In 2004, Monsanto had plans to launch an experimental biotech wheat, but shelved the earlier version amid widespread market concern over foreign buyers’ aversion to genetically modified foods. The company faced controversy once again after the U.S. Department of Agriculture said an Oregon farmer had found the genetically engineered wheat growing in his field.
Despite the controversies, Monsanto continues to expand both its biological and technology platforms; in Q1 alone, the company increased research and development spending by 18%.
Disclosure: No positions at time of writing