Monsanto soars on strong first-quarter earnings, product pipeline

It is tough to tell which is taller: the heap of products in Monsanto Co.’s pipeline, or the record-high peak its share price hit Thursday.

What seems certain is that the former fed the latter — and so did first-quarter financial results that surged past analysts’ expectations.

Agribusiness Monsanto, based in Creve Coeur, nearly tripled net earnings over the first quarter of a year ago, driven by strong performance of its seeds and Roundup weed-killer in Brazil and Argentina. Early biotech seed sales booked in North America also bode well for the company’s traditionally stronger second and third fiscal quarters.

As a result, Monsanto boosted its full-year earnings per share expectation to $2.50 to $2.60, up from prior guidance of near $2.40. Its shares spiked on the news, gaining 8 percent over the previous day’s close. Advertisement

"Monsanto is a fierce competitor that continues to dominate a market that it essentially created more than a decade ago," wrote Morningstar stock analyst Ben Johnson in a Thursday research note. "Through its ongoing commitment to research and development and assertive capital allocation, the company has positioned itself to increase shareholder value over the long haul."

Along with its financial report, Monsanto released an annual update of its research and development pipeline. The company genetically modifies corn, soybeans, cotton and canola seeds to withstand applications of herbicide, ward off pests and boost yield. Genetic traits in the pipeline would boost the crops’ ability to withstand drought, or improve their value to food and fuel processors.

Monsanto conservatively estimates the retail value of products under development at more than $5 billion by 2020.

"We’re directing (our) innovation at the most valuable, most promising commercial targets with a pipeline loaded with blockbusters," said Chief Technology Officer Robb Fraley in a conference call with analysts.

Monsanto expects to launch two products by the end of the decade: A yield-boosting, improved version of its Roundup Ready glyphosate-tolerant soybeans; and SmartStax corn that combines eight genes for insect and herbicide resistance. They will serve as platforms upon which the company will layer further genetic improvements.

These include a trio of projects that could reach the market in 2012: The industry’s first drought-tolerant corn seed; soybeans that withstand dicamba weedkiller; and pest-killing soybeans for Brazil that would be the first biotech crop developed exclusively for a country other than the United States.

Today, strong demand by farmers is prompting Monsanto to speed up planned investments to boost corn-seed production, and it is considering new capital expenditures to smooth the flow from its factories of Roundup. 

"What we’re seeing here is still very much the beginning of the innovation wave. … We’re still in the 1960s equivalence of the advances in computers and (information technology)," Fraley said. "We’re going to see waves and waves of new types of products coming out of this pipeline in the years to come."