uploads///Gross Income and Gross Margin

Analysts’ Estimates for Monsanto’s Margin Expansion


Dec. 27 2017, Updated 3:40 p.m. ET

Gross income and margins

In a commodity business, gross income and margins are the most critical line items tracked by investors and analysts. The commodity business runs on thin margins. A company with a higher gross margin might indicate its superior position in the industry (XLB). Let’s discuss the expectations for Monsanto’s (MON) gross income and margin.

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Analysts’ estimates

For 1Q18, Wall Street analysts estimate a gross income of $1.3 billion. On net sales of $2.8 billion, it will translate into a gross margin of 48%. It’s expected to remain unchanged YoY (year-over-year) from 1Q17.

As we move into the fiscal estimates, Wall Street analysts expect the company to report a gross income of $8.4 billion. On the fiscal 2018 net sales estimate of $15.3 billion, it will translate into a gross margin of 55.1%. YoY, the gross margin is estimated to expand from 54.3%.

We observed that the sales are expected to rise 4% YoY, while the gross income is expected to rise 6% YoY. An improvement in the company’s margins appears to be coming from an improvement in the cost of goods.

To learn more about Monsanto’s cost of doing business, read An In-Depth Review of Monsanto Company’s 2016.

Peers’ estimates

There are expectations that FMC (FMC) will also experience expanded gross margins in the next 12 months. Analysts estimate that FMC’s gross margins will improve from 38.1% to 42%. LyondellBasell Industries NV’s (LYB) margins are also estimated to expand YoY to 19.6% from 18.6%.

On the other hand, Scotts Miracle-Gro’s (SMG) margins are estimated to remain unchanged at 36%.

There are expectations of more margin improvements as we move down the income statement.


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