Monsanto (NYSE:MON) will release its quarterly report on Wednesday, and investors are waiting patiently to see which direction the agricultural-products stock will move next. After having moved to six-year highs at the end of 2013, Monsanto has consolidated its gains, even as rivals DuPont (NYSE:DD) and Dow Chemical (NYSE:DOW) have made moves to capitalize more on the ag niche and come into more directly competition with Monsanto.

Monsanto generates huge controversy because of its sales of genetically modified seeds, but the company does a lot more than just making seed. Yet even though the seed side of the business makes up more than two-thirds of its current revenue, other areas, such as its herbicides and its farming-services segments, have huge amounts of growth potential. But will Monsanto be able to overcome both the negative reputation it has among many GMO-activist opponents as well as DuPont, Dow, and its other corporate rivals? 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.

Source: Monsanto.

Stats on Monsanto

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$5.81 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for Monsanto earnings?
In recent months, analysts have had slightly pessimistic views on Monsanto earnings, cutting a nickel per share from their February-quarter estimates and $0.07 per share from their views for the current quarter. The stock has also suffered modest losses, falling about 2% since late December.

Monsanto's November-quarter results gave the ag company reasonably positive momentum coming into 2014, with sales gains of 7% and earnings rising 8% from year-ago levels. Although Monsanto's core seeds and genomics business actually saw gross profits fall for the quarter, the agricultural productivity segment more than made up for those losses, with herbicide demand in international markets helping drive results. In response, Monsanto gave favorable guidance for the remainder of fiscal 2014, citing emerging markets as a key part of the company's future.

But competition is only going to get tougher in the coming years. DuPont has made a major transformation in order to emphasize its agriculture and nutrition business, selling off other slower-growing business lines and seeking to divest itself of others. Similarly, Dow Chemical sold off its chlorine business in order to focus more on the bigger opportunities in the agricultural area.

Still, Monsanto is making strides toward developing an even wider moat. Between a large pipeline of seed products in soybeans, cotton, and wheat, as well as DroughtGard corn seeds that have outperformed similar products from DuPont and Syngenta (NYSE:SYT), Monsanto is looking for ways to deal with changing climate trends. At the same time, Monsanto has kept working on biological defenses against pests and disease, and Monsanto's Integrated Farming Systems business promises to give the farming community a one-stop platform to drive further improvements in crop yields.

One wildcard for Monsanto is whether anti-GMO sentiment will escalate into outright bans or other action. With many countries still refusing genetically modified crops, it's critical for farmers to be able to segregate GMO from non-GMO crops. Yet the potential for cross-contamination has led to disputes between farmers, and while Monsanto and its peers have done well in defending cases against them, the risk is that ag professionals won't be able to deal with the liability risk involved with Monsanto products.

In the Monsanto earnings report, watch for the breakdown between the seed and genomics business and the rest of Monsanto's operations. Further weakness in seeds could point to a longer-term downturn for the stock, but in the long run, the fundamentals still look strong for the ag giant's future.

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