We recently upgraded our recommendation on Monsanto (MON) from Neutral
to Outperform based on the company's growth strategy and competitive pricing policy. The company posted encouraging results for the third quarter with an EPS of $1.26, beating the Zacks Consensus Estimate of $1.11.
Monsanto's continued product development, consolidation of business segments, cost optimization and yield increase tactics are expected to fetch higher revenue and market leadership going forward. The company's capabilities in biotechnology and breeding research also appear encouraging.
Moreover, the third party contracts and hedging mechanism of the company help to combat the risks arising out of seed cost and weather
fluctuations. Our price target of $89.00 equates to 31.0x of 2011 earnings estimate.
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