Will Monsanto (NYSE:MON) Thrive, or Just Survive?

There are a lot of challenges in making informed decisions about a company like Monsanto (NYSE:MON), as the anti-business press loves to take a company like this and pummel them.

What makes that a problem isn't the negative press, but the believing of the negative press, which usually entails a very skews and one-sided presentation of the company.

As far as investing goes, this is a disaster, because if the market is buying the company, that means it is viable, and has something to it beyond the emoting media attempting to affect public opinion.

So with Monsanto, there is very little middle ground. People either hate if for the perceived monster seeds they've created, or love it because they're perceived to be an answer to what will ultimately become a global food crisis.

That's of course a generalization, as there's all sorts of secondary elements like emerging super weeds from Roundup or seeds which aren't performing as they were expected to as far as yields go.

There is no doubt an effort going on to destroy Monsanto, which I doubt will succeed, as the uncertainty about the ability to supply food to populations is just too big to allow potential answers to be destroyed.

Social upheaval would emerge if food was scarce or too highly priced, as food riots have shown over the last couple of years.

So there is no doubt Monsanto will survive. The question is whether it will be able to thrive or not.

Monsanto has a strong competitive advantage with certain seeds, and a potentially strong pipeline. The trouble is the courts removed the sugar beet seed they produced from market, and unless there's intervention, that will remain that way for at least a couple of years. What other seeds could be hindered from being brought to market, even with them being in the pipeline?

If the SmartStax corn seed doesn't perform as expected, as early results have shown, that also shows there could be holes in the pipeline as well.

These are just a couple of the variables involved.

Monsanto reminds me a lot of the oil industry. Even though the problems with the BP (NYSE:BP) oil spill gave opponents of the industry a lot of fuel to fight them with, oil exploration continues to grow, and it's not going to go away any time soon, even though some in the financial press attempt to make it look that way.

Monsanto has suffered some black eyes in the battle lately, but demand for their products and the rising population make it very unlikely they'll be kept down for a long period of time.

Short term they're going to struggle immensely, but more than likely, unless they underperform on things they have control of, they will ultimately come back strong, with solid control of major seed markets.

The real major unknown is if laws are created to stop them. Other than that, I don't see them being held down in the long term.

There probably be more pain in the short term before they begin their recovery.

Monsanto (NYSE:MON) Should Add Debt for Share Repurchase Says Morgan Stanley (NYSE:MS)

Morgan Stanley (NYSE:MS) has said Monsanto (NYSE:MON) shouldn't be afraid of adding debt to their balance sheet in order to buy back shares in the company.

"We believe that the company could take on up to - $6.5 bn of debt (-2x net debt to EBITDA), buy back 20-25 percent of shares outstanding, and still have a BBB investment grade credit rating. We estimate this scenario would be 14 percent accretive in the first full year. Importantly, given both the favorable lending rate environment (we estimate debt could be taken on at no more than 4.5 percent) and the company's current 2.3 percent dividend yield, the after-tax cost would be just 0.9 percent," said Morgan Stanley analysts Megan Davis and Vincent Andrews.

Monsanto Chief Executive Officer Hugh Grant had been counting on SmartStax corn seed to make up for the loss of revenue and earnings associated with Roundup herbicide, where generic brands have expectedly pummeled the margins of Monsanto after the patents ran out.

That hasn't happened so far, as disappointing early results are coming in lower than projected, although that could improve as results come in from more northerly states.

Monsanto has projected earnings from SmartStax increasing profits as high as 17 percent. The upcoming earnings report is eagerly being looked to to see if improvements have come from latest field reports.

Morgan Stanley has a price target of $70 on Monsanto, which was trading at $47.66, down $0.60, or 1.34 percent, as 12:52 PM EDT.

Monsanto (NYSE:MON) Lowers Earnings' Estimate for Year, Cutting Jobs

As the end of their fiscal years comes today, Monsanto (NYSE:MON) has started to manage expectations by lowering their earnings estimates, saying they see things coming in on the low, and not the high end of their projections.

The company will also take a one-time restructuring charge for its latest quarter of $150 million. Monsanto also said they're going to cut up to 700 more jobs as well.

Profits for the year were estimated at a range of $2.40 to $2.60, and are expected to finish the year at $2.40 to $2.45 a share.

In somewhat of a contradiction, the company said they had a "solid" fourth quarter, and gave no reason for the lower numbers.

But it's no secret the major reasons are their faltering "Roundup" herbicide business, and the need to lower prices of new seed products in order to compete; something they haven't had to do much in the past.

The cuts weren't small either, coming in at 75 percent for their Roundup Ready 2 seeds and the 67 percent for their Smartstax seeds.

DuPont (NYSE:DD) has positioned themselves as a low-cost alternative, putting the question in the mind of farmers if they need the extra traits offered by Monsanto, which cost more.

The combination of these two things has been the major factors in lower earnings for Monsanto.

Monsanto (NYSE:MON) Bumps Up Quarterly Dividend

Monsanto (NYSE:MON) announced today that its Board of Directors has increased the quarterly dividend of the company from $0.265 a share to $0.28 a common share. That's an annualized rate of $1.12.

The increase is 5.7 percent, while the dividend yields 1.9 percent.

Shareholders of record as of October 8, 2010, will receive the dividend, payable on October 29, 2010.

Monsanto has recently been served with a class action lawsuit from shareholders. Specifically it targets the herbicide products, where shareholders say they failed to disclose material adverse facts related to that segment of the company.

The suit alleges the positive statements made in relationship to the earnings of Monsanto were "misleading" and "lacking in a reasonable basis."

Monsanto's (NYSE:MON) Earnings Plunge 45 Percent in Third Quarter

As expected, Monsanto (NYSE:MON) struggled in the third quarter, as profits plummeted by 45 percent for the period ending May 31.

Earnings dropped to $384 million, or 70 cents a share, from $694 million, or $1.25 a share, from the same quarter last year.

After adjustments, the company earned 81 cents a share, while analysts had been looking for 79 cents a share.

Revenue for the quarter dropped from $3.16 billion last year to $2.96 billion in 2010. That was a significant miss, as analysts had looked for an increase over the third quarter last year, expecting $3.17 billion in revenue.

The primary reason for the poor performance of the company was the ongoing struggles related to their Roundup herbicide business, which has seen revenue, profits and margins under pressure as it has had to compete with generic competitors with lower prices.

Weed resistance to the herbicide has been another issue related to declining sales.

Also a disappointment to the company has been its new Roundup Ready 2 Yield soybeans, which haven't done as well as the company hoped in relationship to performance, which has generated complaints from farmers on the high price of the product.

Monsanto has been addressing those issues by lowering prices for seed licensees and cutting premiums paid on the seed by farmers by up to half of what it had been.

The company reiterated its guidance for the fiscal year for earnings, saying they're maintaining the $2.40 to $2.60 a share they've asserted in the past.

Guidance for next year was also confirmed, where Monsanto still looks for earnings growth to be somewhere in the mid-teens. The majority of that growth will come from the seeds and genomics segment of the company.