GMOs Remain the Driving Force for Monsanto Company

Monsanto reported solid second quarter earnings driven by the company's seeds and genomics segment.

Apr 2, 2014 at 11:29AM

Second quarter results released today by Monsanto (NYSE:MON) show that the company's seeds and genomics segment continues to perform well even amid suggestions that the agricultural sector is seeing greater than usual variability. Monsanto has committed a growing amount of money and resources into ventures beyond its now staple genetically modified (GM) seed business, but existing sales along with expansion in corn and soybeans remain the company's primary revenue generator and also its main source for growth over the near term.

Growth is going more global
Second quarter sales in the seeds and genomics segment increased from $4.3 billion in 2013 to $4.6 billion in 2014, amounting to nearly 80% of the overall growth in gross profit realized by the company. Net sales over the first six months of the fiscal year were up nearly 7% from 2013 in spite of weather-related shipment delays encountered over the first part of the quarter. Sales growth in the quarter for Monsanto also bodes well for competitor DuPont (NYSE:DD) who will release earnings at the end of the month. In general, increases in demand for soybean and corn crop seeds should lift the agricultural technology industry as a whole.

Monsanto is achieving growth in the seed sales despite reports by the United States Department of Agriculture (USDA) that, based on survey results from U.S. growers, acreage devoted to corn dropped by nearly 4% this year as compared with 2013. Fortunately for Monsanto, the decline in corn acreage is being more than compensated by an increase of nearly 6% in soybean acreage. With positive growing conditions, the increased acreage in the U.S. contributes to a strong chance at generating a record production year for soybeans.

The growth of their soybean platform domestically has been accompanied by global growth spurred by the massive and very successful launch in Latin America of their Intacta RR2 PRO soybeans. The domestic and global growth within the soybean segment led Monsanto to a record quarter for both soybean sales and gross profit, compounded by overall margin expansion within the segment.

The drop in corn acreage had little effect on Monsanto's corn sales that saw second quarter growth that more than made up for a challenging first quarter. The corn seed and traits segment remains the company's largest profit generator. Margins within the segment continue to grow as well.

The rest of the story
Seeds and genomics will provide Monsanto with a growing revenue base for years to come, but the company in the meantime continues to increase research and development (R&D) investments beyond just genomics in its goal to help farmers feed a growing population in the midst of global climate change. Monsanto CEO summarizes by explaining:

Our broader portfolio enables us to deliver growth today, while also building the platforms that will help us bring additional value to farmers around the world in the years to come.

R&D expenses for the quarter were up $44 million over the prior year period as the company continues to invest in agricultural biologicals, as demonstrated by collaborations with Preceres LLC, and integrated farming systems, as shown by its acquisition of the Climate Corporation and expanding research into data science.

The takeaway
Monsanto's second quarter earnings put it in great position to meet its full year guidance. Consistent earnings per share, a growing core business, and increasing R&D investments into both their central genomics technologies as well as forward-looking technologies make Monsanto a solid investment, even as naysayers cite consumer concern over GMOs and increased competition from other seed companies as troubling indicators for its future growth.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

 

Shamus Funk has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers