Wednesday, October 6, 2010

Monsanto (NYSE:MON) Losses Deeper Than Expected

Right after Monsanto Company (NYSE:MON) reported losses has shrunk from the fourth quarter last year, narrowing from $233 million, or 43 cents a share, to $143 million, or 26 cents a share in the fourth quarter this year, the share price skyrocketed, but it quickly came down to earth on the realization the losses were still deeper than expectations.

Operating losses came to 9 cents a share from an operating profit of 2 cents a share. Revenue increased from $1.9 billion to $2 billion.

Dissatisfaction from farmers over some crop yields in the midst of high seed prices had the company struggling during the quarter.

Guidance wasn't encouraging for the seed giant either, as the company said next year the results could continue to be weak, as they revise prices and work with their product line.

SmartStax seed corn is the main culprit in the results, as the expected yields are below estimates, and the high price of the seed has opened the door for major competitor DuPont (NYSE:DD), which has managed to take share away from the company with some crops.

Monsanto Chairman Hugh Grant said, "We've focused on giving farmers the most profitable product options. We're trying hard to back that with our actions from our new products and new price points."

Margins were the key to the poor performance, as sales increased to $1.95 billion in the quarter, as low margins and a $132 million restructuring charge cut gains.

Along with losing market share with soybeans and corn share remaining level, the herbicide business of the company remains under pressure as low-cost alternatives are offered on the market after the patents of the company ran out on them.

Analysts had been looking for a loss of 6 cents a share for the fourth quarter.

Guidance for earnings in 2011 came in at a range from $2.72 to $2.82, down from the $2.83 analysts are estimating.

The shares of Monsanto popped on the guidance for 2011 because it wasn't downwardly revised, and the increase in sales, but has pulled back as the market digested the numbers.

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