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Monsanto Outlook Dims

Monsanto says it's unlikely to meet its 2012 financial targets.
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(Monsanto earnings item updated for stock price movement and to add detail from the company's quarterly statement.)

ST. LOUIS (TheStreet) -- Monsanto (MON) fell short of expectations for its fiscal second-quarter results and announced today that its previously targeted profit goals for 2012 were likely unrealistic.

Even as the Justice Department investigates the seed industry on antitrust grounds and rivals accuse Monsanto of monopolistic behavior, the company appeared to attribute the projected shortfall partly to competition.

In a press release before the bell Wednesday, Monsanto said that as part of its quarterly earnings announcement, "the company discussed performance against projections in both the seeds and traits and agricultural productivity segments during a year of intense competitive pressure for both sides of the business." Presumably as a result of that discussion, the company "acknowledged its goal of doubling 2007 gross profit by 2012 is unlikely," Monsanto said.

Monsanto then went on to reconfirm, once again, its full-year fiscal 2010 guidance, but with a tweak. It now expects 2010 profit to come in "at the low end" of its previously targeted range: $3.10 to $3.30 a share.

After initially trading in the red Wednesday morning, Monsanto shares have pushed into positive territory since the opening bell. Investors may have been expecting Monsanto to make a more radical reduction to its growth targets, said Steven Spencer, a partner at the trading shop CMB Capital, in New York.

At about 10:30 a.m. EDT Wednesday, Monsanto stock was trading at $70.35, up 82 cents, or 1.2%. Volume surpassed 13 million shares, already more than double the daily average turnover in the name.

According to analysts and seed dealers,

Monsanto has faced challenges this year

convincing growers to buy its latest-model genetically engineered corn and soybean seeds at premium prices. Some have posited that the company has had, in effect, to reduce prices for those seeds, cutting into future profits.

"Over the course of a five-year operational plan, the landscape can change," Monsanto's CEO, Hugh Grant, said in a prepared statement. "While there may be options to make an accelerated push for 2012, it's clear to me that achieving that objective would involve making short-term choices that are not in the long-range interests of the business.

Stockpickr Answers Is anyone buying MON here?

"Still, nothing has changed in my fundamental view of the business. We have the best products, we have a commercial and technology lead and we have the experience to apply the lessons of 2010. Given that, I am confident that we're a growth company going forward."

Excluding charges, Monsanto said it posted earnings "on an ongoing basis" of $1.70 a share. Including items, the company earned $887 million, or $1.60 a share.

Analysts were looking for EPS of $1.73, according to

Thomson Reuters

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Year-ago profit came to nearly $1.1 billion, or $1.97 a share.

On the top line in the latest quarter, which ended Feb. 28, Monsanto reported revenue of $3.89 billion, slightly missing the

Thomson Reuters

consensus target of $3.93 billion. In last year's second quarter, Monsanto's revenue totaled $4.04 billion.

This is the second period in a row in which Monsanto has fallen short of Wall Street financial targets. In January, the St. Louis crop bioengineering concern posted a surprise loss as sales of its one-time blockbuster herbicide RoundUp declined sharply amid heightened competition from overseas producers. The spray, which in its heyday made billions of dollars for Monsanto, lost patent protection a decade ago; generic makers of the herbicide have increasingly the company's RoundUp sales.

Indeed, Monsanto blamed its year-over-year decrease in sales to pricing pressure on RoundUp from those generics, especially in markets in Brazil, Argentina, Asia and the U.S.

As for its seed business, Monsanto appeared to shrug off concerns about its two key genetically engineered products -- the new SmartStax corn and RoundUpReady2 soybean seeds, which the company recently launched into the market. Monsanto said that more than 40% of its branded customers are trying the new soybean seed, while 20% are trying SmartStax.

In the just-ended quarter, earnings before interest and taxes in the seed and genomics segment came to $1.36 billion, up 12% from $1.2 billion a year ago, Monsanto said. It singled out corn seeds as one of the drivers behind that growth. Net sales for that crop increased 8%, or $169 million, year-over-year.

-- Written by Scott Eden in New York


>>Farmers May Force Monsanto Price Cut

>>Monsanto Falls on First Quarter Loss

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.