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Boeing, Monsanto May Benefit From Kerry's Indian Diplomacy

Stocks in this article: NEMTEXHONBAMON

NEW YORK (TheStreet) -- Every great power, or every power that thinks it is great, wants to use the United States as a punching bag. It's like the old TV show Everybody Hates Chris, in which the supposed object of everyone's ire grows up to be a rich and famous entertainer.

U.S. Secretary of State John Kerry seems willing to wear the "kick me" sign if it leads to outcomes the U.S. wants, and India is just the latest to take advantage. Everybody hates Kerry? Fine. But if you do business with him, in the end, that's the bottom line.

That's how I look at India's refusal Thursday to sign off on new World Trade Organization rules, throwing the future of the global trade bloc into doubt. Kerry is in India today, on a trade mission with U.S. Trade Representative Penny Pritzker, and what better way for new Prime Minister Narendra Modi to welcome him than with the diplomatic equivalent of a custard pie in the face?

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India's media is filled today with stories about the South Asian nation's power to tell the world where to get off. Government supporters say the new stance on behalf of its "food security" program is a strong, sharp departure from the policy of the previous government. 

In fact, the deal that was on the table was not only in India's interest, but in line with policies the new government was said to favor, replacing huge stockpiles of domestically produced food with direct transfers of cash that can be used to buy imports.

So who is likely to gain if Kerry can get the WTO negotiations back on track, maybe by accepting a few rhetorical kicks in the can? The biggest winners (and potential losers) are companies that export extensively to India, whose imports from the U.S. totaled nearly $22 billion in 2013. 

These include gold companies like Newmont Mining (NEM), helicopter makers like Textron (TEX) and Honeywell (HON) and aircraft makers like Boeing (BA). The product categories exported to India totaling more than $1 billion last year were gem diamonds, raw gold and military and civilian aircraft. India's jewelry industry depends on imports of raw materials and export markets for its finished goods.

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But the biggest U.S. beneficiaries of a deal, and perhaps the real causes of the hang-up, are agriculture companies like Monsanto (MON), whose seeds have made the U.S. an enormous food exporter, but whose genetically modified organism (GMO) technology continues to be opposed in many parts of the world, including India.

Before the WTO refusal, the Modi government was about to launch field trials of GMO crops, but was facing opposition within its own coalition.  Monsanto is also fighting reports of Indian farmers committing suicide over the issue of GMO cotton.

Thus, we have the current little theater production. Today's noise will be followed by tomorrow's quiet, and it is in the quiet that the real news will be made. Today the noise suits India, and makes it bigger in the eyes of the world. But once Kerry leaves, calm is likely to return, because the economic benefits of this deal to India are enormous, and the bottom line is always the bottom line.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


Now let's look at TheStreet Ratings' take on some of these stocks.

TheStreet Ratings team rates BOEING CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate BOEING CO (BA) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BA's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 1.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • BOEING CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BOEING CO increased its bottom line by earning $5.97 versus $5.12 in the prior year. This year, the market expects an improvement in earnings ($8.10 versus $5.97).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Aerospace & Defense industry. The net income increased by 51.9% when compared to the same quarter one year prior, rising from $1,088.00 million to $1,653.00 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

TheStreet Ratings team rates MONSANTO CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate MONSANTO CO (MON) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, notable return on equity and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 0.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • MON's debt-to-equity ratio is very low at 0.22 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, MON has a quick ratio of 1.76, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for MONSANTO CO is rather high; currently it is at 58.96%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.18% is above that of the industry average.
  • MONSANTO CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MONSANTO CO increased its bottom line by earning $4.56 versus $3.78 in the prior year. This year, the market expects an improvement in earnings ($5.22 versus $4.56).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, MONSANTO CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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