Monsanto Continues to Grow

Monsanto Co. (MON), a Zacks Rank #1 (Strong Buy) company, continues to outperform the industry in both the growth and income categories. MON’s earnings per share are expected to grow by 19% over the next 3 – 5 years, versus the industry average projection of 15%. The majority of the companies within Monsanto’s industry group offer no dividend, while Monsanto’s dividend yield stands at 0.8%.

Company Description

Monsanto produces seed brands in large-acre crops like corn, cotton, and oilseeds (soybeans and canola) and small-acre crops like vegetables. The company also produces in-the-seed trait technologies for farmers that are aimed at protecting their yield, supporting on-farm efficiency and reducing on-farm costs. Monsanto licenses its seed and trait technologies to other companies throughout the world.

In addition to its seeds and traits business, Monsanto manufactures the world's best-selling herbicide, Roundup®, in addition to other herbicides used by farmers, consumers and lawn-and-garden professionals.

The company’s business is structured in two segments, seeds and traits as well as agricultural productivity.

Recent Events

In early July, Monsanto completed its acquisition of Marmot, S.A., which operates Semillas Cristiani Burkard [SCB], a privately-held seed company headquartered in Guatemala City, Guatemala.

Monsanto explained that SCB is the leading Central American corn seed company focused on hybrid corn production. The company has long-standing relationships with farmers and works with more than 900 dealers in the Central American region. The acquisition will build on Monsanto's corn business leadership in Latin and Central America, and enable it to offer farmers in Central American countries broader access to corn seed products.

"We look forward to working with the people at SCB and continuing their mission of delivering innovative higher-yielding seed offerings to farmers," said Brett Begemann, Monsanto's executive vice-president of Global Commercial.

Strong Quarterly Results Reflecting Year-Over-Year Growth

The company posted strong fiscal third-quarter results in late June. Chairman, President and Chief Executive Officer Hugh Grant said:

Backed by continued growing demand for our products, the first nine months of our fiscal year has been remarkable and we're now increasing our full-year guidance. This strong growth sets up a solid foundation for our business and to reach our target of more than doubling gross profit in 2012. Because we're both discovering and delivering innovative tools that can help increase productivity on farm, we offer an attractive solution to the farmer and their mission of meeting our world's growing food, feed and fuel needs. While others are asking should it be food or feed or fuel, we believe the answer is and, and we have the solutions in hand to be a significant part of that answer.

Third-quarter net sales of $3.6 billion jumped 26% on a year-over-year basis. The company noted that the sales results reflected increased revenues from the company's Roundup agricultural herbicides globally, increased soybean seed and traits revenues in the United States, increased corn seed and trait revenues in the United States, higher corn seed revenues in Europe-Africa, and higher cotton seed and trait revenue in the United States.

Earnings per share of $1.45 topped the year-ago $1.03 and exceeded the consensus estimate by 7.4%

More Signs of Growth

MON’s earnings per share are expected to grow by 19% over the next 3 – 5 years, versus the industry average projection of 15%. The company’s return on equity [ROE] of 22% surpasses the industry average of 15%.

A Dividend that Continues to Soar

The company declared an increased quarterly dividend on its common shares of 24 cents per share, which 37% higher than previous dividend. The dividend was paid out on July 25, 2008.

"The increase in our quarterly dividend reinforces our continued commitment to return value to our shareowners," said Terry Crews, Executive Vice President and Chief Financial Officer of Monsanto. "This increase further demonstrates the board's confidence in Monsanto's strategy and our financial discipline."

Since Monsanto was spun off as an independent company in August 2002, its dividend has been upped seven times, which translates into an increase of 300%.

The majority of the companies within Monsanto’s industry group offer no dividend, while Monsanto’s dividend yield stands at 0.8%.