US Monsanto earnings forecast cut on glyphosate weakness

11 September 2009 17:33  [Source: ICIS news]

NEW YORK (ICIS news)--Wall Street analysts slashed on Friday earnings forecasts for US genomics and agricultural chemicals firm Monsanto on weakness in its glyphosate-based herbicides business.

Monsanto had announced that its earnings per share would come in at the low end of its $4.40-4.50 guidance for its fiscal 2009 year, which ends in August. The company offered a guidance of $3.10-3.30/share for fiscal 2010, based on lower-than-expected gross profit in its Roundup and other glyphosate-based herbicides.

Jefferies & Co analyst Laurence Alexander cut his fiscal 2010 earnings estimate from $3.85/share to $3.30/share on the expected glyphosate weakness and revised his share price target down from $98 to $92. He maintained a “buy” rating on the stock.

“We are lowering our [glyphosate] forecast from $750m [€518m] to $652m gross profit on 260m gal [984m litres] sold (versus Monsanto’s under 250m gal outlook) and a blended average branded price of $10.10/gal, down 46% year over year,” Alexander said in a research note. 

“Incentive programmes to drive glyphosate volumes in 2010 should be a $0.15-$0.20/share headwind. This should reverse in 2011,” he added.

JPMorgan analyst Jeffrey Zekauskas cut his fiscal 2010 earnings estimate from $4.35/share to $3.60 to reflect lower Roundup profits.

“We now expect the company to report about $700m in gross profit for Roundup versus our prior estimate of $1.3bn,” he said.

The analyst has a neutral rating on Monsanto.

“There is some near-term supply/demand imbalance in the chemical side of agriculture,” said Carl Casale, Monsanto chief financial officer earlier.

“We are now managing our way through a competitive spike in the supply of generic glyphosate,” he added.

Shares of Monsanto were down by 92 cents, or 1.2%, to $78.38 in morning trading on Friday.

($1 = €0.69)

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By: Joseph Chang
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