Monsanto 3Q numbers

Monsanto is a controversial company. I often see posts on Facebook with deformed mice who have been fed food grown from genetically modified seeds. I won't pretend to know the science behind it all but I certainly know where I stand on the issue. I see myself as a conservation conscious individual. In the world I follow, I know that the biggest threat to endangered wild animals is land encroachment. GMO's are more efficient and require less land for higher crop yields. That allows more land to be untouched and to remain in their natural state. If everything was grown organically and naturally, the Amazon Jungle, the forests of Asia and certainly the plains of Africa would be under a lot more pressure. Today we feed 7.3 billion people using the same amount of land as we did 40 years ago to feed 4 billion people.

Monsanto released results yesterday which were solid but were negatively received by the market. Here goes.

"Net sales for the fiscal year 2015 third quarter increased over the prior year's third quarter to $4.6 billion, with gross profit for the quarter also increasing over the prior year period to $2.7 billion. For the first nine months, net sales were $12.6 billion and gross profit $7.2 billion.

The company's fiscal year 2015 third-quarter earnings per share (EPS) was $2.39 on an ongoing and as-reported basis, compared to an EPS of $1.62 on an ongoing basis and as-reported basis in the same quarter last year. EPS for the first nine months of fiscal year 2015 was $5.75 on an ongoing and $5.80 on an as-reported basis, compared with an EPS of $5.43 on an ongoing and $5.45 on an as-reported basis in the same quarter last year."

The company has volatile earnings as it relies on volatile crop yields and prices. Just like any commodity based supplier. The negative share price reaction came from a weaker guidance and an announcement to stop the share buy back program in order to pursue a massive $45bn acquisition of Syngenta. Syngenta dominate the global pesticide market, Read more about the deal here Monsanto Claims Accelerated Innovation by Combining with Syngenta.

The company has good margins and offers a vital service in an industry that will never go away. In fact, as populations grow and people get wealthier, more food will be consumed. It is certainly a growing industry. If you can stomach the earnings swings as crop prices change then Monsanto is still a great long term investment.