Morgan Joseph Says Monsanto Management Sobered (MON)

In a research report today, analysts from Morgan Joseph said that it appears as if Monsanto's (NYSE: MON) management team has "swallowed a large helping of humility that, we hope, will serve the company down the road." On today's conference call, MON management "threw out its long-range guidance of doubling gross profit by FY2012." The company admitted that they were "adjusting to the reality of much tougher competition."

Monsanto's management did reaffirm its guidance for this year of $3.10-$3.30 per share, but said that results would likely be at the lower end. Management believes that the company's earnings could grow 13-17% per year, which the Morgan Joseph analysts project will result in EPS of $3.65 in 2011 and $4.30 in 2012. This is somewhat disappointing compared to the record earnings of $4.41 in 2009, but Morgan Joseph believes that "the company is 'paying the piper' for its arrogance, in our view, seen most especially in the way it treated customers (e.g., setting obscene prices for RoundUp herbicide and branded seeds.)" The analysts believe that going forward, Monsanto will be more customer focused.

Despite some of the criticism lobbed at management, Morgan Joseph remains bullish on the stock. They are reiterating their BUY recommendation and have set a new price target of $90 on the shares based on FY 2012 EPS estimates of $4.25. During today's trading session, MON has gained 1.75% to $69.28.