Monsanto Company (MON) is poised to see increased profitability, enhanced margins and strong double-digit earnings per share growth with China’s recent approval to import the company’s next-generation Intacta soybeans, says Chris Kapsch, Analyst at Topeka Capital Markets.
“The real opportunity for Monsanto over that horizon is driven by the prospects for the company to enjoy a step change in its profitability in its Latin American business, which is largely a function of the recent Chinese approval of its next-generation Intacta soybeans…over the next two to five years as growers both in Brazil and Argentina adopt the next-generation Intacta beans, there’s an opportunity for Monsanto to see a step change in its profitability,” Kapsch said.
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In the next two to five years, growers in Brazil and Argentina are expected to adopt Monsanto‘s Intacta bean, which has the first insect-protected trait in soybeans. As more growers adopt the technology, Kapsch believes the company will see ample opportunity for profitability, as well as enhanced margins and sustainable double-digit earnings per share growth.
“In those two countries combined, there’s roughly 95 million to 100 million acres of soy planted each year, so that opportunity plus the continued mix upgrade of its both corn and soy products in North America — from additional traits being stacked on its germplasm, and the germplasm being continually upgraded — will continue to help drive enhanced margins, which should allow Monsanto to sustain strong double-digit earnings per share growth, which in turn should help the stock do well and maintain its fairly rich multiple over that time, and probably regardless of where corn prices tend to settle,” Kapsch said.
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