Previously, we discussed the idea that Monsanto’s (MON) business is seasonal. Seasonality gives a rise to variability in revenue. In 2015, about 72% of the company’s sales were recorded in the second and third quarters from its seeds and genomics segment. The company also earns revenue from its agricultural productivity segment. The seeds and genomics segment includes the sale of products related to seeds while agricultural productivity includes the sale of herbicide products.
Outlook for 1Q16
As of January 4, 2016, Wall Street analysts are expecting Monsanto to report revenue of $2.4 billion for the upcoming 1Q16 quarter. This would mean a growth of 2.1% compared to $2.5 billion in the corresponding quarter a year ago in 1Q15. Much of this weakness is due to low commodity prices and weaker global currencies compared to the US dollar.
Outlook for 2016
For the next four quarters, or in 2016, the analysts are estimating revenue of $14.5 billion, or a fall of 3% from $15 billion in 2015. The farm economy continues to remain weak following the bumper crop period in 2014. The resulting excess supply has led to a downward pressure on commodity prices, and this affected the profitability of farmers. On the other hand, the glyphosate herbicide under the agriculture productivity segment could also face pricing pressure in 2016.
You may access Monsanto (MON) through the VanEck Vectors Agribusiness ETF (MOO). It invests 8% of its portfolio in Monsanto. MOO also includes Potash Corporation (POT), Mosaic (MOS), CF Industries (CF), and Agrium (AGU). They form about 14% of the VanEck Vectors Agribusiness ETF (MOO).