It has been a busy year for Monsanto (MON) and a volatile one for MON stock, even if the year is only a week old.
The seed supply company learned late last week that General Mills (GIS) would no longer be using genetically modified ingredients in its Cheerios breakfast cereal (a big chunk of Monsanto’s business is the sale of bioengineered seeds), and on Wednesday, the Street received its quarterly report for Monsanto earnings.
What do we need to know about last quarter’s results for MON stock? And more than that, what’s the likely fallout from the decision by General Mills to at least take a baby step toward what’s perceived as a safer and more marketable product base?
As always, it depends.
Monsanto Earnings for Q1
With or without the nagging anti-GMO movement casting a shadow on Monsanto’s outlook, there’s no denying the company recently wrapped up a great Q1.
Monsanto earnings were up more than 8% on a year-over-year basis, growing from 63 cents to 69 cents per share for the quarter ending Nov. 30. MON earned 67 cents on an operating basis, but forecasters were looking for a bottom line of only 64 cents. Sales were up by 7%, reaching $3.1 billion.
Things were so solid for MON in the first quarter of fiscal 2014, in fact, that the company made a point of reiterating and affirming its full-year forecast for a profit between $5 and $5.20 per share, up significantly from last year’s bottom line of $4.56.
MON stock responded by improving 3% Wednesday morning.
However, what exactly is behind all this big growth for Monsanto is where investors find something of a stumbling block.
The bulk of Monsanto’s business is the sale of bioengineered seed, and the bulk of 2014’s growth is projected to be driven by a newly engineered soybean seed. Activists, however, just forced a food producer to remove an engineered food from one of its cereals.
If Cheerios is just the beginning of a bigger movement, the current Monsanto menu doesn’t offer socially acceptable — and therefore marketable — seeds.
MON stock owners need not panic, though.
Is Non-GMO Food the New Norm?
Just to get the facts straight, General Mills isn’t changing the main ingredient in Cheerios — oats — because it doesn’t need to. See, whole grain oats aren’t available in a bioengineered form.
What General Mills is changing is the cornstarch found in Cheerios. For the original Cheerios anyway, that ingredient will now only be sourced from non-genetically engineered corn, making the basic box of Cheerios a 100% natural product.