On Dec 8, 2015, Zacks Investment Research upgraded Monsanto Company MON to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell) primarily on account of its business innovations and growth initiatives.
Going by the Zacks model, Zacks Rank #3 companies are more likely to perform in line with the broader market.
Why on Hold?
In view of the food price inflation and ever-expanding population, farmers are consistently striving to meet the rising demand through increased yield. Thus, the demand for Monsanto’s products which serve to increase crop productivity is also on the rise. The company boasts a high brand status in the global modified seeds market backed by superior technology and unique agro products.
Monsanto is initiating certain restructuring strategies to cut costs and improve growth opportunities. Additionally, its solid liquidity position has enabled it to fund growth plans to boost top and bottom line. Supported by these initiatives, the company aims to double the earnings per share growth by 2019. We believe that Monsanto’s commitment to boost shareholders’ value will retain investors’ confidence in the stock. Furthermore, the benefits are expected to offset the headwinds in the near term.
Nevertheless, Monsanto’s business is currently facing intense competition in the industry. Any strategic success on the part of the rivals can significantly lower its share in the near future. Unlikely appreciation of the U.S. dollar is hurting the company’s international revenues and margins. Considering such adverse foreign currency translation impacts, Monsanto expects earnings per share within $5.10−$5.60 in fiscal 2016 compared with $5.73 in fiscal 2015.
Moreover, Monsanto conducts its trade in the global agricultural industry that is subjected to cyclical fluctuations owing to climatic conditions. Thus, its stock price remains volatile with respect to the upswings and downswings of the global agro industry.
Stocks to Consider
Monsanto currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks within the industry include Atlas Iron Limited AGODY, Akzo Nobel N.V. AKZOY and Nevsun Resources Ltd. NSU. All the three stocks currently have a Zacks Rank #2 (Buy).
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