The world’s biggest seed company delivered a double-whammy Wednesday. Not only did Monsanto (MON) blow the Street’s fourth-quarter earnings estimate, but it cut its full-year outlook too. Declining seed sales and ballooning costs were to blame.
Naturally, shares sold off on the news, which only confirms what a lackluster year it has been. MON is up 9% on the year, lagging the broader market by 7 percentage points.
Still, there’s no reason to bail out on this ag stock just yet. Costs can always be brought under control (corporate America is great at that), and the latest results were the exception to the rule. Prior to today, MON beat the Street’s profit projection for three straight quarters.
Bottom Line: Monsanto is the industry leader where secular growth is a slam dunk. But with a long-term growth rate of 14% and a forward price-to-earnings ratio of 20, shares are fairly valued at best. Not too pricey to dump, but not cheap enough to buy, either.