Monsanto’s Gross Margin Expectations for 4Q17
When looking at commodities such as agricultural chemicals (MXI), it is important to discuss margins, as players such as Monsanto (MON), PotashCorp (POT), FMC (FMC), and CF Industries (CF) are sensitive to price movements.
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In 4Q17, analysts’ mean expectation for Monsanto’s gross income is $1.06 billion with a top line of $2.5 billion, which translates to a 42.1% gross margin. Comparing this with the gross income of $1.15 billion, top line of $2.56 billion, and gross margin of 45% seen a year prior suggests a margin contraction.
For the next four quarters, the company’s margins are expected to contract from 53.5% to 52.8%. Whereas analysts expect sales growth of 3.8% for Monsanto, its gross income is expected to grow by just 2.5% over the next four quarters.
Lower crop prices have narrowed the scope of margin sustenance for agricultural chemical companies. In a bid to protect margins, companies have resorted to cost-cutting measures such as consolidating with other players by way of mergers and acquisitions. Next, we’ll discuss the company’s EBITDA (earnings before interest, tax, depreciation, and amortization) margins.