Monsanto's 3Q17 Earnings Delivered a Positive Surprise

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Part 4
Monsanto's 3Q17 Earnings Delivered a Positive Surprise PART 4 OF 7

Digging into Monsanto’s Profitability in 3Q17

Monsanto’s profitability

Monsanto’s (MON) net margins grew in 3Q17 but its gross margins and EBIT (earnings before interest and tax) margin contracted year-over-year. In this part, we’ll discuss Monsanto’s profitability in more detail.

Digging into Monsanto&#8217;s Profitability in 3Q17

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Gross margins

As we discussed earlier, Monsanto’s overall gross margins fell from 56.8% in 3Q16 to 56.4% in 3Q17. In 3Q16 and 3Q17, the Seed and Genomics segment included restructuring charges as well as impairment charges related to certain assets.

Similar restructuring and impairment charges were also included in the calculation of the Agricultural Productivity segment’s gross margins. However, the segment’s gross profit rose 12% due to volume and pricing of glyphosate-based products, according to the company. Some of Monsanto’s herbicide products overlap with companies (XLB) such as Dow Chemical (DOW), FMC (FMC), and DuPont (DD).

EBIT margins

Monsanto’s EBIT margins followed a similar path to its gross margins. The EBIT margins contracted to 27.3% in 3Q17 from 30.6% in 3Q16.

Net margins

In contrast, Monsanto’s net margins expanded during the quarter from 17.1% in 3Q16 to 19.9% in 3Q17. During the quarter, the company’s effective tax rate fell from 40% in 3Q16 to 21% in 3Q17.

To learn more about Monsanto, read Monsanto Company: A 2016 Review.

Next, we’ll discuss the company’s drivers for corn and soybean gross profits. We’ll conclude the series with an update on Monsanto’s merger with Bayer.


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