WASHINGTON -- Monsanto said its earnings fell more than 5 percent in the third fiscal quarter on lower biotech seed sales, but its performance topped Wall Street estimates and the company raised the lower end of its 2014 outlook. It also announced plans to repurchase $10 billion in shares.
The combination sent shares up more than 5 percent in morning trading Wednesday.
Monsanto Co. said the $10 billion share buyback will take place over two years. The company has about $1.1 billion remaining under its previous share buyback plan.
The St. Louis company said it earned $858 million, or $1.62 per share in the three months ended May 31. That was down from $909 million, or $1.68 per share, a year ago. Revenue was flat at $4.25 billion.
The company's earnings beat the average analyst projection, as measured by FactSet, for earnings of $1.54 per share on revenue of $4.39 billion for the quarter.
The company raised the low end of its 2014 forecast to between $5.10 and $5.20 per share. Previously the company's estimate was for earnings of $5 to $5.20 per share.
Chairman and Chief Executive Officer Hugh Grant laid out plans to double earnings per share in five years, supported by further gains in its genetically modified seed operations and newer businesses such as precision farming. The share buybacks are bigger than expected and will lower the share count by about 15 percent, said Mark Gulley, a New York-based analyst at BGC Financial LP.
"They have listened to shareholders, and they are taking advantage of very strong fundamentals," Gulley said by phone Wednesday.
Monsanto has dominated the bioengineered-seed business for years and recently began developing products specifically for emerging markets such as Argentina, Brazil and parts of Asia. The company is also making investments in computerized tools for the agricultural sector.
Monsanto executives predict this expanded portfolio of products will allow the company to double its earnings per share over the next five years.
"The new target reflects management's confidence in the growth opportunity for the core business and transformational potential in new platforms," the company said in a statement.
Monsanto said its seed business will remain the main driver of growth through 2019, contributing an estimated $4 billion in profit over that period.
Sales of the company's best-selling product, genetically-enhanced corn seeds, declined 16 percent in the most recent three-month period as more farmers switched from planting corn to soybeans. The U.S. Department of Agriculture expects farmers to plant 6 percent more acres of soybeans this year than in 2013, amid predictions of tight supply and higher global demand.
Monsanto also sells genetically-enhanced soybeans designed to increase yield and resist herbicides and pesticides. Sales of those seeds increased 24 percent to $816 million in the last quarter.
Monsanto shares rose $6.10, or 5 percent, to close Wednesday at $126.73. Its shares have risen more than 25 percent over the past year.
Information for this article was contributed by Jack Kaskey of Bloomberg News.
Business on 06/26/2014