Analysts: Monsanto Is Poised to Dominate Big Agro in 2014

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Source: Thinkstock

Source: Thinkstock

On Thursday, analysts at JPMorgan Chase upgraded Monsanto (NYSE:MON) from Neutral to Overweight, setting a price target of $125 on the stock. Shares closed the day up 2.3 percent at about $117 on the news but have since fallen back to below $113, down about 2.6 percent year to date, at the time of writing.

The upgrade was predicated on an argument by analyst Jeffrey Zekauskas, who, according to the Financial Post, told clients that “Activist investors tend to invest where there is room for value creation by changing management for the better, or by splitting a company into parts or through increasing balance sheet leverage in service of share repurchase. Monsanto meets two of these criteria.” Specifically, Zekauskas believes that Monsanto created value by splitting itself into more nimble and focused units, and by repurchasing shares.

The split would be down the line between Monsanto’s seeds-and-science business and its products business, which is perhaps best represented by Roundup (aka glyphosate, the most widely used herbicide in the United States). At the beginning of April, Monsanto’s “Agricultural Productivity” segment, in which Roundup resides, posted second-quarter net sales of $1.18 billion, an increase of 5.1 percent on the year; gross profit of $454 million, up 22.4 percent on the year; and EBIT of $308 million, up 20 percent on the year.

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