Monsanto Company (MON), Agrium Inc. (AGU): Why This Stock Is Poised to Hit a New High Next Week

Comparatively, Syngenta AG (ADR) (NYSE:SYT) is a pure and thus bigger agriculture play that generated 23% of revenue from seeds, and the rest from crop protection products in 2012. It is banking big on its Agrisure Artesian corn hybrids this year, targeting 400,000 acres, up sharply from 15,000 acres last year. Last month, it also won the USDA’s approval for the Agrisure Duracade protein that controls corn rootworm.

Naturally, as a company that holds the number 1 position in the global seed market, Monsanto can’t lag behind. It is leaving no stone unturned in promoting its DEKALB corn hybrids, even reporting strong orders in its last earnings call. For its Genuity reduced-refuge products (which help control pests), Monsanto Company (NYSE:MON) is targeting up to 38 million acres, up substantially from 27 million acres last year. Both Dow and Monsanto have plans to set up learning centers to teach farmers how to effectively use their herbicides. Robust spring orders and the results of its aggressive sales efforts should show up in Monsanto’s upcoming earnings report.

Home and beyond

For the rest of the year, Monsanto’s focus is likely to be on Latin America. In its latest crop input market report, Agrium Inc. (NYSE:AGU) (which entered the Brazilian market last year by acquiring a fertilizer company) projects production in Brazil and Argentina to be ‘significantly’ higher this year. Syngenta, which derived 28% of sales from Latin America last year, plans to quadruple corn production in Brazil and set up a new plant in Argentina soon.  Meanwhile Dow plans to rapidly ramp up its Powercore product line in the two markets.

Monsanto Company (NYSE:MON)’s recently launched triple-stack corn in Argentina and double-stack corn trait in Brazil should push up its revenue and margins from the market significantly this year. It has already struck an agreement with Brazilian organizations to sell its pest-resistant Intacta RR2 Pro soybeans this year. Details on this should see their way through in its upcoming call.

Foolish takeaway

So good was the pace of orders in its first quarter that Monsanto’s free cash flow expanded to $1.5 billion from $856 million a year ago. Not surprisingly, that prompted the company to up its full-year FCF guidance to $1.8 billion- $2 billion, and EPS guidance to $4.31- $4.41. Monsanto earned $3.70 per share last year.

Nothing would be better than Monsanto sticking to its guidance next week, and I have a hunch it will. Stay tuned as I take you through its numbers and important updates.

The article Why This Stock Is Poised to Hit a New High Next Week originally appeared on and is written by Neha Chamaria.

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