Monsanto (NYSE:MON) has become an agricultural giant, helping farming operations boost productivity through crop-enhancing products and seed traits that have garnered their fair share of controversy over the years. Yet one distracting issue has been the fact that there's still considerable uncertainty about whether the ag company's proposed merger with Bayer will finally move forward. Monsanto appears confident that it will, but shareholders aren't pricing the stock in a manner that shows equal confidence, especially as geopolitical tensions over trade heat up.

Coming into Thursday's fiscal second-quarter report, Monsanto investors had wanted to see continued modest growth in sales and profits. Instead, Monsanto's net sales actually declined from year-ago levels and earnings didn't rise as much as investors had been hoping for. Let's look more closely at Monsanto to see how it did and what's ahead.

Two farmers in a cornfield with very tall corn plants.

Image source: Monsanto.

Another bad quarter for corn

Monsanto's fiscal second-quarter results continued some of the trends that we've seen in recent quarters. Total sales fell about 1%, to $5.02 billion, which was far worse than the $5.3 billion top-line figure that most investors were hoping to see. Net income was higher by about 7%, to $1.46 billion, but after making allowances for extraordinary items, adjusted earnings of $3.22 per share fell short of the consensus forecast of $3.31 per share among those following the stock.

Once again, the seeds and genomics segment was the challenging part of Monsanto's business. Overall sales for the unit were down 2%, led lower by a more than 6% drop in corn seed and traits-related revenue. Gains in soybeans, cotton, vegetable, and other seeds and traits weren't enough to offset the damage done from poor performance in corn.

In its commentary, Monsanto said that it continues to expect record levels of its Roundup Ready 2 Xtend soybean product to get planted during the current fiscal year. However, timing delays in corn planting and generally lower expectations for corn planting acreage weighed on that part of the market. Weakness in corn pricing also hurt the segment's popularity, and overall, pre-tax profit was down about 2% from year-ago levels.

Agricultural productivity continued to help Monsanto. Sales were higher by about 5%, with about a 20% gain in pre-tax profit. Pricing for key products was strong, and the company expects to see ongoing demand for herbicides that are designed to go well with Monsanto's soybean and cotton seeds and traits.

CEO Hugh Grant was happy with how things went. "The business objectives we achieved in the first half of fiscal year 2018 reflect our team's unwavering commitment to our farmer customers," Grant said, and "despite tough farm economics, we delivered a solid second quarter and are staying disciplined on near-term execution of the business." The CEO also pointed to its ongoing efforts to build its business, even as it prepares for the Bayer merger.

Can Monsanto keep moving forward?

Monsanto's future business prospects hinge on the same general areas it has focused on for some time. In seeds and genomics, Monsanto is looking to see greater adoption in soybeans and cotton, and the economics of product launches should get more attractive as demand grows. In the productivity business, pricing for glyphosate will drive future growth going forward. However, Monsanto's efforts to make smart strategic asset sales and licensing agreements will have less of an impact than they have in the past few years.

In terms of future guidance, Monsanto still kept things simple, saying only that it expects growth in pre-tax income during the current fiscal year. Instead, comments centered on the status of the merger with Bayer. Monsanto said that it has seen progress with regulators, with antitrust approvals obtained from the European Commission, China, and Brazil. Bayer will have to divest a number of operations in order for the merger to go through, but Monsanto still sees the deal getting required approvals by the middle of 2018.

Monsanto investors reacted favorably to the report, and the stock climbed 1.5% in late afternoon trading following the announcement. Yet with the stock still trading at a more than $10 per share discount to the $128 per share merger price, it's clear that not all shareholders are convinced that in the currently contentious political environment, a deal between Monsanto and Bayer will actually get done.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.