Trade of the Day: Monsanto Company (MON) Stock May Surge to Buyout Price

Monsanto Company (NYSE:MON) — I last reviewed Monsanto on July 19, drawing attention to the increase in an offer by the German company, Bayer AG (ADR) (OTCMKTS:BAYRY), for this global provider of agricultural products. The offer was for $125 per share in cash.

Yesterday, following a meeting between the management of both companies and President-elect Donald Trump, the deal appears to be on a positive track. The Dow Jones Newswires reported that the Trump transition team says Bayer has agreed to increase its U.S. investment, keep all of Monsanto’s 9,000 jobs in the U.S., and create at least 3,000 new jobs. And Bayer is committed to spending $8 billion on new R&D plans.

Neither company had an immediate statement on the deal, but prior releases indicate that Bayer increased their offer to $128 per share.

Despite having exposure to global markets, currencies, and weather, Standard & Poor’s rates MON a four-star “buy” with a price objective of $128. They point out that revenues are expected to rise 3.7% in fiscal year 2017 (Aug) and 4.1% in FY 2018, and EPS for FY 2017 is projected to be $4.71, up from $2.95 in FY 2016.

They look for FY 2018 earnings to be $5.46. Monsanto’s FQ1 of 21 cents beat S&P’s estimate of 18 cents.

Technically, MON executed a break from a right triangle (Wedge) on Jan. 6. This higher-than-average volume break is probably due to talks with the president-elect but could also be due to S&P’s conclusion that either with or without the merger Monsanto’s future is bright. Either way MON appears to be a “buy” at its current price for a trade to at least $125 for a proposed gain of 15%-plus. MON pays a dividend of $2.16 for a dividend yield of 2%.

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