Monsanto's Bad Seed

Monsanto's stock drop gives investors a good reason to take another look at buying into the firm.

"It's a buying opportunity," said Mark Gulley of Gulley & Associates. Gulley said that the concerns over margins are overblown because the company had included one-time charges in its operating earnings.

He also noted that while its seeds business is growing faster than the higher-margin traits, aka genetically modified seeds, the growth is for the right reasons. "They've made share gains, and there was an acquisition of a Brazilian corn seed company." Gulley added that the surging crop prices will enable Monsanto to raise its seed prices, which will lead to margin expansion next year.

On Wednesday the company laid out a partial plan to increase seed prices for 2009 with some corn prices seen rising as much as 35%, Reuters reported.

Sales from the company's Roundup and herbicide segment jumped 58.5% to $1.2 billion from $757.0 million. The sale of corn and soybeans was also key to the quarter's success.

The St. Louis-based company also raised its full-year 2008 outlook to $3.40 per share, excluding discontinued operations and one-time charges, and $3.63 per share overall. According to a poll taken by Thomson Financial Wall Street, which typically excludes one-time items, had expected $3.39. According to a poll taken by Reuters though, analysts, on average, had expected earnings of $3.41. The company previously projected full-year earnings of $3.38 to $3.48 per share.

For its third quarter, which ended on May 31, Monsanto (nyse: MON - news - people ) reported sales of $3.6 billion, a 28.6% gain from the $2.8 billion reported in last year's corresponding period. Earnings grew 42.3% to come in at $811.0 million, or $1.45 per share, from $570.0 million, or $1.03 per share.

Although earnings were well ahead of Wall Street's $1.34 prediction, the market was upset that Monsanto couldn't meet or beat $3.7 billion in sales. In fact investors were so annoyed they pushed down Monsanto's stock 2.9%, or $3.99, to $131.80 in late-afternoon trading.