Premium agricultural chemicals company Monsanto Company MON recently launched a new accelerated share repurchase (‘‘ASR’’) program that involves buying back $3 billion of its common stock. The company has initiated this repurchase program after completing the formalities related to the agreement with JPMorgan Chase & Co. JPM and Citigroup Inc. C. The new ASR is expected to be accomplished within the next six months.
This $3-billion repurchase program comes under the regime of Monsanto’s conventional $10-billion share repurchase authorization, issued back in Jun 2014. After successfully completing the previous $6-billion program, the company intends to return greater value to its shareholders with the latest repurchase scheme.
Per the terms of the new ASR agreement, Monsanto will be repurchasing $3 billion of its common stock from JPMorgan Chase Bank and Citibank, involving a gross initial delivery of roughly 28.4 million shares based on the current market price. Monsanto would be financing the ASR proceeds from cash on hand as well as issuance of commercial paper.
Moving Ahead
Monsanto has historically expanded its business in the agricultural industry on the back of innovative and genetically tailored herbicides and seeds. The company manufactures these products with an aim of boosting crop productivity as well as controlling the presence of weed-destroying chemicals in different agricultural items. We believe the new ASR program would not only help augment value of the company’s shareholders but also enhance Monsanto’s brand status in the future.
Why a Zacks Rank #4 (Sell)?
Unlikely appreciation of the U.S. dollar continues to hurt Monsanto’s international operations. The company’s earnings in the last reported quarter faced a negative impact of almost 7% due to unfavorable currency translations. Moreover, stiff market rivalry, volatility in the global agricultural industry and certain other external headwinds pose risks for the company. Taking into account these negatives, Monsanto anticipates earnings within $5.10–$5.60 per share in fiscal 2016 as against $5.73 earned in fiscal 2015.
Stocks to Consider
A better-ranked stock in the industry is Asanko Gold Inc. AKG, holding a Zacks Rank #2 (Buy).
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