Surprised by another Monsanto guidance downgrade? Read this
Shares dropped -7% yesterday as “Monsanto Cuts Forecast for 2016, Citing Economic Headwinds” (Wall St Journal leader this morning).
Clearly some investors were surprised by this, although quite why is perhaps the real mystery given the pummelling to LatAm demand for agricultural products which their rivals have been more than open about. For those wishing to stay ahead of the curve I have included the investment summary we published on the stock back on the 6th January after their Q1 results, titled “Q1 FY16: Talking up the story while trimming the immediate numbers!” – Nuff said.
Last rating report – Q1 FY16: Revenues declined -23% from $2.870bn to $2.219bn (-11% at =fx) with gross profit declining by -36%/-$513m to $901m (-17% at =fx), OpEx (excluding the expected -$272m of restructuring charges) down -8.6%/-$85m to $907m (approx. -9.5% at =fx) and adjusted EBIT dropping -$425m from $419m to -$6m; a -15ppts margin wipe-out. By division sales declined by -14% to $1.4bn for Seeds & Genomics, with gross profit down -23%/-$213m to $728m and adjusted EBIT -$87m lower from $43m to a loss of -$44m as weaker Corn seeds and traits (gross profit -30% to $366m) offset stable soybeans. This however was dwarfed by the setback in Agricultural Productivity, where EBIT reduced by -85%/-$325m from $384m to $59m on a -34% fall in sales (to $820m) and -63%/-297m reduction in gross profit (to $173m). After higher interest charges of -$109m (vs -$77m), but excluding -$266m of restructuring expenses, adjusted EPS declined from $0.47 to a loss of -$0.11 ps. Including these charges, GAAP EPS reduced from $0.47 to a loss of -$0.56ps.
OUTLOOK: The group is guiding for adjusted EPS for FY16 to come in at the lower end of its previous guidance range of $5.10-$5.60 ps, albeit with timing changes in restructuring charges expected to bring GAAP EPS to the upper end of its $4.12-$4.79 ps range. The group is reiterating its $500m pa of cost savings by end 2018 as well as its targeted CAGR in EPS from 2016-19 of +20% pa.