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Monsanto Earnings to Drive Ag ETF

NEW YORK ( TheStreet) -- Monsanto (MON - Get Report) has been sapping the strength of the Market Vectors Agribusiness ETF (MOO) this year and did so again Monday, when it lost 0.6% on a day when MOO gained 0.4% and the S&P 500 advanced 0.8%.

Year to date, Monsanto has lost 13.6%. Because Monsanto still makes up a hefty 7.75% of assets in the MOO, the company's shares have dragged down the ETF, which has gained half as much as the S&P 500 this year (4% vs. 8%).

Monsanto plans to report earnings Wednesday, and the news should set the ETF's tone for the rest of the week.

In the previous two quarters, Monsanto earned 2 cents a share and then lost 2 cents share. Earnings estimates for the most recently completed quarter have come down almost 13% in the past three months, to $1.73 per share.

Analysts are more positive about the current quarter that ends in May and have raised estimates by about 15% over the past three months. Positive guidance will probably be needed to break this stock out of its funk, however, but some traders expect it, with options buyers being heavily bullish of late.
Who Owns Monsanto?

Monsanto is not enough to hold down MOO by itself, though, and it's had some help from the other top holdings. No. 1 holding Wilmar International (WLMIF) has been mostly flat since autumn of last year, while Potash (POT) and Syngenta (SYT) are trading at the same levels as December. Last Thursday, Mosaic (MOS) missed estimates for its third-quarter earnings and shares slid 4% on the day.

One has to dig down to No. 6 holding Deere (DE) to find a stock with solid gains. Deere had gained slightly more than 10% through April 5.

As for MOO's other holdings, this year has seen the battle for Terra Industries (TRA) brought to a conclusion, with CF Industries (CF) victorious. Shares of CF are flat for the year, but Terra's stock rallied about 40%; each accounts for about 1.4% of MOO's portfolio.

The merger activity shows companies are bullish on their future prospects, but the market has been watching earnings and isn't impressed. Therefore, expect Monsanto's earnings and guidance to cast a spell -- good or bad -- over MOO this week.
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