Monsanto Earnings Beat Estimates as U.S. Seed Sales Climb

(Bloomberg) -- Monsanto Co., the world's largest seed company, reported record fiscal second-quarter earnings amid signs that U.S. farmers are preparing to sow record acreage with soybeans this year.

Profit excluding one-time items was $3.19 a share in the three months through February, St. Louis-based Monsanto said in a statement Wednesday, beating the highest of 16 analysts' estimates compiled by Bloomberg. Sales rose to $5.07 billion from $4.53 billion a year earlier, also exceeding all estimates.

The company, which is the subject of a pending $66 billion takeover bid from Bayer AG, also said full-year profit is now expected to be at the high end of a previously forecast range of $4.50 to $4.90 a share, excluding one-time items. Monsanto reiterated that it expects completion of the merger with Bayer by end of the year.

The second quarter is typically Monsanto's best period for revenues, reflecting buying from Northern Hemisphere farmers as they plant their next crops, plus end-of-season demand from South America. The U.S. is expecting record soybean plantings this year, the government said last week in an annual report.

Total corn, soybean and cotton acreage in the U.S. is projected to be 2.2 percent higher in 2017, which is positive for Monsanto, Don Carson, an analyst at Susquehanna Financial Group, said in a note before the earnings. The company is also seeing higher sales in North America of Roundup Ready Xtend, its latest genetically modified soybean seed, while benefiting from expanding corn and soy acreage in South America.

“Soybeans will have better profitability this spring, and we're seeing that through the rapid adoption of the new soybeans,” said Chris Perrella, a Bloomberg Intelligence analyst. “Continued strong performance in Latin America plus strong demand for new products” is helping to drive the upside.

Other favorable factors Monsanto noted Wednesday:

• Growth exceeding 25 percent for its global soybean gross profits.
• Raising its estimate for U.S. acreage for its new Roundup Ready 2 Xtend soybeans to 18 million acres (7.3 million hectares) from 15 million previously.
• Increasing demand for cotton seed, which it says will help gross profit from the cotton segment rise more than 35 percent.
• For Monsanto's corn business, strong grower demand in Europe and the U.S., as well cost savings in the U.S.
• Greater-than-anticipated corn acreage growth in Argentina of more than 40 percent.

Monsanto rose 0.5 percent to $115.31 in New York.

Bayer's takeover has a more favorable outlook amid allayed regulatory concerns after competitors Dow Chemical Co. and DuPont Co. won conditional European Commission approval for their merger on March 27. The global seeds and pesticides industry is in the middle of a wave of consolidation that could leave it dominated by just three huge companies. Besides Bayer-Monsanto and Dow-DuPont, China National Chemical Corp. is in the final stages of a takeover of Swiss seed maker Syngenta AG.

To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Susan Warren