Thousands of people may have thrown in their towels on genetically modified food, and researchers may have spent hours trying to prove the growing resistance of pests to genetically modified crops, but none of it seems to be affecting the company that's in the midst of all the controversy.
Monsanto (NYSE:MON) stock continues to inch higher, and has gained a good 8% in just the past three months. Investors should press the alert button because the company is headed for a critical week as it reports its fourth quarter and full-year numbers Wednesday. One thing is for sure: There'll be something in the report for both Monsanto groups, the lovers and the haters. Here's what each side can expect Wednesday.
Keep an eye on the top
Monsanto's fourth-quarter numbers are likely to disappoint investors. Analysts expect the company to turn in a loss of $0.43 per share, though they see its revenue growing 6% year over year. While a loss is bad news, a growing top line should more than make up for the disappointment, since it could also mark the beginning of the next big success story for Monsanto.
Revenue in the months between June and August is primarily driven by international markets, especially Latin America. This June, Monsanto hit a major milestone in Brazil when its next-generation Intacta RR2 PRO soybeans trait was cleared for commercial launch. The approval couldn't have come at a better time, since Brazilian farmers were just preparing for their main September planting season. More importantly, as fertilizer major PotashCorp (NYSE:POT) pointed out in its latest market analysis report, higher prices for soybean is encouraging farmers in Brazil to prefer it over corn. PotashCorp projects 5% higher soybean acreage in Brazil this year.
A perfectly timed opportunity
Naturally, Intacta RR2 PRO has made its way into Brazil at the perfect time, and should ensure Monsanto's leadership in the market. Even as arch rival DuPont (NYSE:DD) tries hard to improve its current market share of just about 10% of the Brazilian soybean market, any innovation from Monsanto, such as Intacta RR2 PRO, has the potential to further push DuPont's growth in Brazil to the back burner. Lower corn acreage only adds to DuPont's agony: It expects "a substantially larger seasonal loss" year over year for its agriculture division this quarter on lower corn planting in Brazil.
That makes Monsanto's upcoming earnings call critical, because it will give investors the first updates about Intacta since its approval. Monsanto has targeted three million acres for the trait this planting season. If met, it should be reason enough for celebration at the company, since Intacta is touted to be "one of the most significant growth drivers in its global portfolio" moving forward.
In July, while Syngenta (NYSE: SYT) committed $1 billion toward its African business, DuPont acquired majority stake in South Africa's leading company, Pannar Seed.
But as DuPont and Syngenta fight it out in Africa, Monsanto is making sure it stays at the forefront in Brazil.
What's more, one of Monsanto's DroughtGard Hybrids won approval from China in June, which translates into another huge opportunity for the company. Investors can expect further updates on this Wednesday.
The Foolish bottom line
Remember, since the upcoming earnings report will also mark the end of the financial year for Monsanto, investors should pay attention to the company's growth plans, product pipeline, and expectations going into financial year 2014. Interestingly, Monsanto already sees a mid-teens growth in its 2014 earnings per share as its global business expands. That comes on top of the company's projections of more than 20% improvement in its 2013 EPS. Also look out for Monsanto's cash flows. The company increased its quarterly dividend by 15% in August. A growing war chest may indicate further good news for investors in the future.
Newer markets, growing top line, expanding cash flow, and a good outlook for 2014 -- if Monsanto displays all this Wednesday, it will only suggest that the GMO story is not going anywhere so soon. That could make GMO activists squirm in their chairs, but should be enough to please investors.