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Monsanto

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Monsanto (MON)

Company Profile: Monsanto is a St. Louis, Mo.-based global provider of agricultural products for farmers. Its seeds, biotechnology trait products, and herbicides are designed to help farmers improve productivity, reduce the costs of farming and produce better foods -- or, according to the company's detractors, grow and maintain a monopoly for Monsanto.

Monsanto increased its dividend by 5.7% to 28 cents per share. It will be paid on Jan. 28, 2011, to shareowners of record on Jan. 7, bringing Monsanto's yield to around 1.7%.

Monsanto shares rallied in the second half of December following a favorable outlook at the Bank of America Merrill Lynch Global Industries Conference, and news that the USDA had completed an environmental impact study on the company's biotech alfalfa offering.

Monsanto is one of the biggest players in the global agrichemical business, providing proprietary brands of seeds and herbicides to farmers. Fueling that business is a well-funded research and development group that's been leading the charge toward creating biotechnology trait packages for crops that increase yields and make them impervious to industrial herbicides used to kill nearby weeds. Already, the firm has a major hold on the U.S. agricultural industry, and inroads are being made in developing countries where improved crop output is a high priority.

With deep margins and a respectable cash-flow engine, this stock should find its dividend payouts relatively safe in the future. That's the hope of Monsanto shareholders like the Vanguard PRIMECAP Fund (VPMCX). Other major holders of Monsanto include George Soros and The Bill and Melinda Gates Foundation.

On Dec. 28 Monsanto announced that it tapped Pierre Courduroux as its new CFO and senior vice president, effective Jan. 1, 2011. The 45-year-old currently serves as Monsanto's finance lead for its global business operations. Courduroux joined Monsanto in 1990 and was recently responsible for the global finance organization across Monsanto's crop protection and seeds-and-traits divisions.

On Dec. 29 analysts from Argus Research reiterated a hold rating on Monsanto shares. Boenning & Scattergood initiated coverage of the agribusiness in October with a neutral rating. Deutsche Bank reiterated a buy rating on the stock in late September, lowering its price target by $5 to $65.

On Jan. 5 analysts at Piper Jaffray raised their price target on Monsanto by $6 to $81, maintaining an overweight rating on the stock. Piper Jaffray noted that the action comes ahead of Monsanto's fiscal first quarter earnings report, due out on Thursday.

"In the seasonally slow [first quarter], we expect the company to be modestly profitable, but more importantly we expect the company to speak positively about Fall orders & the Spring planting outlook in the U.S. as well as the season currently underway in Latin America," the firm noted. "In particular, we believe the RoundUp Ready 2 soybeans could surprise to the upside. Fertilizer giant Mosaic kicked off ag sector earnings with strong results and the stock was indicated higher in after hours trading, pointing to a continuation of the sector's [second half of 2010] outperformance."

On Jan. 6 Monsanto met earnings expectations with first-quarter profits of $6 million, or a penny per share, on revenue of $1.8 billion. The seed company's first quarter is typically its most sluggish due to the seasonality of demand for agricultural products. Still, revenue increased in all its major crop segments. Increased planting in Argentina led the strongest regional gains in Monsanto's Latin America market in the recent quarter. Restructuring moves in the prior fiscal year led a 9% drop in first-quarter expenses.

On Jan. 11 Monsanto shares got a boost after analysts at Argus Research upgraded the stock to buy from hold, setting an $87 price target.

The analyst cited improved sales of Monsanto's Roundup herbicide as reason for the upgrade. The chemical weed killer had been an underperforming unit for Monsanto over the past several quarters.

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