Monsanto Merger With Bayer Progresses

Company also reports a robust growth in first quarter 2018 earnings

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Monsanto Co. (MON, Financial) closed up 0.4% on the New York Stock Exchange on Thursday after posting first quarter 2018 results.

Higher glyphosate pricing triggered robust growth in earnings. However, what likely made the stock rally was the company's update on the merger with Bayer.

The U.S. multinational agribusiness corporation said that the merger is progressing as planned and is expected to close in the first part of 2018. From this merger, Monsanto expects to accelerate the growth of products it offers to farmers, the company said.

The synergy coming from the merger is expected to contribute significantly to Monsanto's overall sales, which for the past two quarters have been flat compared to analogous quarters a year prior.

For the first quarter, Monsanto's revenue increased only by 0.4% year-over-year to $2.66 billion. Monsanto missed consensus on revenues by $110 million.

Highlights of the results include a 17.07% year-over-year decline in corn seed and traits sales to $787 million, while soybean seed and traits sales jumped 21.3% to $728 million.

The chart below shows a picture of Monsanto’s revenues over the last six quarters:


For a larger perspective, the chart below portrays the trend in the corporation’s sales over the last five fiscal years:


Earnings per share from continuing operations were 41 cents, which beat the prior-year quarter by 20 cents. However, this missed consensus by 1 cent.

On a GAAP basis, Monsanto's earnings per share were 38 cents versus 7 cents a year ago.

Given the pending acquisition by Bayer, Monsanto did not provide financial guidance for fiscal year 2018.

For the second quarter of fiscal 2018, analysts expect Monsanto will report earnings per share of $3.28 and revenues of $5.37 billion.

Monsanto traded Friday morning around $117.93 per share. The stock has gained 12% over the last 52 weeks and has underperformed the S&P 500 index by 8%:


Source: Yahoo Finance

The 52-week range was $105.56 to $122.80.

The stock has a forward price-earnings ratio of 21.19 versus an industry median of 16.58. For full fiscal 2018, analysts expect earnings per share of $5.65.

Monsanto's dividend yield was 1.83% versus an industry median of 1.81% and versus the S&P 500 dividend yield of 1.77%.

The forward dividend and yield are $2.16 and 1.83%. The industry has a forward dividend yield of 1.9%.

Disclosure: I have no positions in any stock mentioned in this article.