What Record Did Monsanto Break in 2012?

Monsanto (NYSE: MON  ) posted fiscal first-quarter 2013 results yesterday that blew past expectations. Revenue jumped 21% to $2.94 billion, and earnings per share of $0.62 cruised past analyst expectations of $0.37. But for long-term investors, the more important news may have been a record 18 R&D projects moving into new phases of development over the past year.

R&D is the future
Monsanto has focused research on maximizing yield with an integrated system instead of just selling components. So advancements in new projects will create selling opportunities up and down the value stream instead of just a single product. Last year, the company advanced five projects related to corn, two in soybeans, and three in cotton, along with eight other projects.

The company is also leveraging this R&D on a global scale by launching products in new geographies. Latin America is a big focus, with expanded usage in Brazil and Argentina.

Why it matters
Monsanto isn't the only one making advanced seeds and chemicals that increase yield for farmers. BASF and DuPont (NYSE: DD  ) are also major conglomerates in the business, but the difference is Monsanto's focus on agriculture. BASF and DuPont make a lot of other products, which takes away from R&D dollars and provides a great comparative upside for Monsanto.

The hope is that Monsanto can take more share of products aside from seeds in the coming years, growing the business as a result. So far, the pipeline puts the company on the way to success.

Betting on yield and a growing population
There are a number of ways to play the ag market, but Monsanto looks to be one of the hottest companies around from an operational standpoint. Anything that increases yield is a hot commodity, with a growing world population and growing weather disturbances that affect stocks. PotashCorp (NYSE: POT  ) and Mosaic (NYSE: MOS  ) are also providing the fertilizer needed to increase yield and are now trading at levels that should be attractive to investors. 

With less and less arable land available around the world, increasing yields from existing plots will become increasingly important to keep up with expected population growth. Cheap and effective fertilizers could be the key to achieving this goal. As the global leader in potash production, PotashCorp has several barriers to entry established that make it nearly impossible for competition to break through. Click here now to access The Motley Fool's new premium research report on PotashCorp, in which we cover precisely what these barriers to entry are and detail several other key reasons this company presents such a compelling investment opportunity today.


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  • Report this Comment On January 09, 2013, at 8:00 PM, funfundvierzig wrote:

    It is telling that investors value superior-managed Monsanto at $53 billion or $10 billion more than they value the entire DuPont conglomerate, chemicals, commodity materials, food additives, and hum-drum seeds and all. The market cap of DuPont is $43 billion, way down from its all-time high of $110 billion set in May of 1998 on a much greater number of outstanding shares, 1.3 billion to be exact.

    ...funfun..

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