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Monsanto: Earnings Estimates and Target Price

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Earnings growth

Earnings growth should eventually translate into share price appreciation, which is important for investors. Earlier in this series, we saw an expectation of year-over-year growth in sales and margins for Monsanto (MON). Let’s see how the growth estimates will translate into earnings growth.

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Analysts’ estimates

For 1Q18, Wall Street analysts expect an EPS (earnings per share) of $0.42, which is expected to almost double from $0.21 per share in 1Q17.

For fiscal 2018, analysts expect the company to report an EPS of $5.7, which will grow ~3% year-over-year from $5.5 in fiscal 2017.

We observe that the modest growth of 4% in sales translated into just 3% growth in the EPS. The company expects that its merger with Bayer in the coming year will bring significant synergies, which should translate into a better return on investment for investors.

Analysts’ ratings

As of December 25, 2017, the stock was covered by 18 analysts according to Reuters. The current consensus rating on the stock stood at 2.56 or an overall “hold” recommendation for the next 12 months.

Of the 18 analysts, 12 analysts recommend a “hold” for the stock.

Target price

The current consensus median target price for Monsanto is $128, which translates to a return potential of 10.3%.

The median price of $128 is the price that Bayer will pay to acquire Monsanto if it gets the necessary regulatory approvals. The current price could be reflecting investors’ apprehension due to regulatory challenges.

To find ratings for agribusiness players (MOO) like FMC (FMC), Scotts Miracle-Gro (SMG), and PotashCorp (POT), read Agribusiness Stocks: December Analyst Ratings and Price Targets.

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