Can Monsanto Company Keep Its Earnings Growing in 2014?

Monsanto (MON) will release its quarterly report on Wednesday, and investors have recently sent the stock to nearly six-year highs on the strength of its earnings. Yet as DuPont (DD), Syngenta (NYSE: SYT), and other rivals hone in on the lucrative agricultural chemicals and seed industry to boost their own profitability, will Monsanto be able to sustain the growth engine that has helped its shares almost triple since mid-2010?

Monsanto used to a much more diversified chemical company, but it was fairly early to discover the potential for profiting from the need for greater crop productivity. With a wide variety of products, including seeds, herbicides, pesticides, and other chemicals, Monsanto has created plenty of controversy, but it has also become a household name in the farming industry. The biggest question Monsanto faces is whether the big gains that have improved farmers' financial positions in recent years will continue to drive their fortunes higher and therefore give them more disposable income to spend on products to enhance crop yields even further. Let's take an early look at what's been happening with Monsanto over the past quarter and what we're likely to see in its report.

Stats on Monsanto

Source: Yahoo! Finance.

Which way will Monsanto earnings move this quarter?
In recent months, analysts have had mixed views on Monsanto earnings. They've cut their full-year fiscal 2014 projections by a nickel per share, but they've increased their fiscal 2015 estimates by $0.03 per share. The stock has continued moving higher, though, rising 11% since early October.

Monsanto's most recent quarterly report in early October showed a hint at the challenges that the company has faced lately. Monsanto reported a loss that was larger than most investors had expected, and it gave poor guidance for the 2014 fiscal year. The company pointed to weakness in the sales of some of its genetically engineered seeds as one cause for its overall shortfall, with GMO soybean sales plunging 38%.

Yet at the same time, Monsanto made a big move toward the future by buying Climate Corporation for $930 million. The purchase gives Monsanto access to the proprietary technology that Climate Corporation has used to help its farming clients predict the likelihood of favorable weather and make plans for optimal growing strategies. By integrating the business into its ag-product offerings, Monsanto can hopefully give those clients seeds with the most appropriate traits to withstand whatever conditions farmers are most likely to face in any given season. That will be especially important in differentiating Monsanto's competitive advantages over rivals Syngenta, DuPont, and Dow Chemical (DOW), especially as those companies have increasingly agreed to cross-license favorable traits to resolve intellectual-property litigation.

Monsanto still faces huge public outcry over the safety of genetically modified organisms in food. Last week, General Mills became the latest food company to weigh in, saying it would make its Cheerios cereal GMO-free, addressing customers' concerns over seed technology. With efforts to require GMO labeling still ongoing, Monsanto has still had only limited success in convincing the world that its products are equally safe as crops grown without genetic modifications. At the same time, both Monsanto and Syngenta have had GMO crops appear in unexpected places, threatening farmers' ability to export crops to countries that ban GMOs from their national food supplies.

In the Monsanto earnings report, watch to see whether the ag specialist is able to rebound from its earnings miss in the previous quarter. Without some positive momentum coming into 2014, Monsanto might have great difficulty duplicating its share-price gains from 2013.

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