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    Top NYSE Stock – Robust Q3 Results boost Monsanto Shares

    Top NYSE Stock – Robust Q3 Results boost Monsanto Shares

    Monsanto Company’s (NYSE: MON) shares soared in this morning’s trade after the company posted Q3 results for fiscal year 2011 topping analyst estimates. The company’s upside move was partially limited by the news that is under investigation by the Securities and Exchange Commission regarding Monsanto’s customer incentive programs related to its glyphosate products for fiscal years 2009 and 2010. The stock closed the trading session at $70.26 on volume of 10.2 million shares.

    Monsanto, which is a leading provider of technology-based solutions and agricultural products that improve farm productivity and food quality, reported yesterday that for its fiscal third quarter 2011 net sales increased 21% to 3.59 billion, topping market consensus view of $3.36 billion, according to Thompson Reuters. The growth was driven by solid volume growth in engineered corn and soybean seeds, as Monsanto convinced more farmers to buy pricier varieties with several engineered traits.

    The company has been working for years to shift its business focus away from farm chemicals and into higher margins genetically altered seeds and the Q3 fiscal year 2011 results show that this strategy is paying off. Approximately 75% of Monsanto’s revenue is derived from the sale of seeds and genomics, compared to 55% in 2008.

    The better product mix, lower growth in operating expenses, as well as economies of scale effect, allowed Monsanto to see its net income rising 77% to $680 million, or $1.26 per share, for Q3 fiscal year 2011, compared with $384 million, or $0.70 a share, a year ago. Analysts polled by Thompson Reuters were expecting the company to earn $1.11 a share.

    Following better-than-expected results for Q3 fiscal year 2011, Monsanto raised its full-year earnings guidance, with full-year 2011 ongoing earnings now seen in the range of $2.84 to $2.88, up from $2.72-$2.82. Analysts were expecting Monsanto to earn $2.82 a share on revenue of $11.37 billion.

    Going forward, the company will continue to promote its latest achievements and get the more expensive seeds planted to demonstrate to farmers the economic benefits and increased efficiency, even if Monsanto will have to discount prices. The farmers worldwide are focused on technology and a more productive offering from Monsanto could allow the company to better compete against  low cost offerings from developing countries.

    The good news on earnings were partially tainted by Monsanto’s announcement that SEC has subpoenaed the company as part of an investigation into its herbicide business. The company has been offering farmers who use Monsanto’s products cash incentives to help them battle weeds that have grown resistant to its glyphosate products, namely Roundup. Monsanto’s Roundup Ready corn, soybean and cotton seeds, which are engineered to be resistant to the herbicide, are popular with farmers, but they have contributed to the spread of herbicide-resistant weeds. While Monsanto declined to discuss additional details of the, the company said that it would cooperate with a subpoena for documents.

    Meanwhile, the latest results suggest that the future of Monsanto’s seeds business is bright. The company reported increased sales volumes and, more importantly, improved pricing, which demonstrate that the new line of seeds are gaining acceptance. Moreover, the company succeeded to stop the decline of its agricultural productivity segment, which grew 57% in Q3 fiscal year 2011, despite the significant competitive pressure from cheaper herbicide versions produced in China.

    In addition, the company’s robust results was positively influenced by increasingly strong demand for food that supports profitable farm economics worldwide and rapidly rising prices for a number of key crop commodities. Prices for agricultural commodities have reached extraordinarily high levels in 2010 and 2011 compared to historic standards, thus sending clear signals to farmers worldwide to plant more area and apply more technology to their crops.

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