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Monsanto's (MON) Prospects Look Bright on Solid Q2 Earnings

On Apr 10, we issued an updated research report on premium agricultural chemicals firm, Monsanto Company MON.

Over the last one month, shares of this Zacks Rank #2 (Buy) stock yielded a return of 1.77%, outperforming 0.97% growth recorded by the Zacks classified Agriculture/Products industry. Notably, the attractiveness of this stock as a current investment choice is supported by its favorable Growth Style Score ‘A’.

Bullish Factors Behind the Favorable Rank  

Monsanto reported better-than-expected second-quarter fiscal 2017 (ended Feb 28, 2017) results. The company’s quarterly top- and bottom-line results handily surpassed the respective year-ago tallies and also came ahead of the Zacks Consensus Estimate.

Rise in global population and increasing demand for crop-yield enhancing products like Roundup Ready 2 Xtend Soybeans are anticipated to drive the company’s top-line performance moving ahead. Notably, the World Agricultural Supply and Demand Estimates (WASDE) forecasts that by the end of fiscal 2017, gross demand for corn and soybeans would rise by around 1.7 billion bushels and 600 million bushels, respectively.

Notably, the company projects sound bottom-line performance for the near term, on the back of higher revenues and greater operational discipline. Monsanto currently estimates to accrue adjusted earnings (ongoing basis) at the high end of the $4.50–$4.90 per share range, in fiscal 2017.

In addition, Monsanto's innovation investments are expected to boost its revenue and earnings growth trajectory in the upcoming quarters. For instance, commercialization of the Nemastrike technology (produces non-imitable nematode control solutions) is likely to secure sturdy market response from calendar year 2018 for the company.

Additionally, the company’s agreements with Broad Institute (inked in Sep 2016 and Jan 2017) and Dow AgroSciences (inked in Oct 2016) are likely to unlock advanced technological capabilities.

Monsanto expects to successfully close Bayer AG’s BAYRY buyout deal by the end of calendar year 2017. Bayer’s distinct crop protection portfolio, when combined with Monsanto’s popular Climate FieldView and Seeds & Traits platform, would likely give rise to a highly competitive seeds traits and agricultural chemicals behemoth in the industry.

Over the last 30 days, the Zacks Consensus Estimate for the stock has been revised upward for both fiscal 2017 and 2018, reflecting positive market sentiments.
   
Other Stocks to Consider

Other similarly-ranked stocks within the industry are listed below:

Albemarle Corporation ALB has a positive average earnings surprise of 14.28% for the last four quarters.

Arconic Inc. ARNC has an impressive positive average earnings surprise of 79.97% for the trailing four quarters.

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Bayer AG (BAYRY): Free Stock Analysis Report
 
Albemarle Corporation (ALB): Free Stock Analysis Report
 
Arconic Inc. (ARNC): Free Stock Analysis Report
 
Monsanto Company (MON): Free Stock Analysis Report
 
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