Monsanto (MON) Down Even After Meeting Expectations

Shares of Monsanto (NYSE:MON) are trading down today even though they met expectations for the quarter. Some appear to believe by not having a blowout quarter the company's guidance will be somewhat weaker as the year goes on.

For the quarter Monsanto generated a profit of $1.02 billion, or $1.88 a share, up from $887 million, or $1.60 a share, last year in the same quarter, a gain of 15 percent. Net sales jumped 6.1% to $4.13 billion.

Concerns were somewhat allayed over the performance of SmartStax, its high-end biotech corn seed, which struggled last year because of high prices and a weaker economy at the time. Rival DuPont (NYSE:DD) was able to gain some share by offering a lower price alternative with less traits, which some farmers gravitated to.

Monsanto said now sales are on track to meet the goal of having the seed planted in "mid-teens" millions of acres in the U.S. Soybean sales are also said to be on track to meeting company goals.

Farmers also have more money this year, reducing their resistance to price, and Monsanto was able to increase gross margins from 54 percent to 55.9 percent as a result.

Hugh Grant, chairman and chief executive of Monsanto, said in a statement, "We have the right pieces and the right execution to feel very good that mid-teens earnings growth in 2011 is on track."

Monsanto boosted its full-year free cash flow guidance for the fiscal year to $900 million to $1.1 billion from $800 million to $900 million.

Monsanto was trading at $70.24, falling $3.08, or 4.20 percent, as of 11:52 AM EDT.

Monsanto (NYSE:MON), Dow (NYSE:DOW) Get Competition from DuPont (NYSE:DD), Syngenta (NYSE:SYT) on SmartStax

DuPont (NYSE:DD) has licensed Syngenta's (NYSE:SYT) corn rootworm trait MIR604 in order to compete more effectively against Monsanto (NYSE:MON) and Dow Chemical (NYSE:DOW) and SmartStax.

Pioneer Hi-Bred, which is wholly-owned by DuPont, will market and sell the seed for them.

By combining Syngenta's corn rootworm trait MIR604 with Acremax XTRA, Dupont's Pioneer should be able to compete against SmartStax, as it would offer above ground and below ground action.

That should allow Pioneer to win regulatory approval for 5% integrated refuge product, which would provide the type of convenience that is offered by SmartStax.

Pioneer is working toward having the hybrids on the market for 2012-2013.

With it being vital for DuPont to have a product that can compete against SmartStax, they're going to have to pay a hefty price to get it via the licensing agreement with Syngenta, which says may end up being more than $400 million via cumulative payments.

Eventually Dupont may choose to use its own proprietary trait to replace MIR604, but that wouldn't happen for several years if they choose to go that route.

DuPont closed Friday at $49.86, up $0.41, or 0.83 percent. Dow closed at $33.94, down $0.40, or 1.16 percent. Monsanto closed at $64.60, gaining $1.60, or 2.54 percent. Syngenta closed at $56.99, down $0.39, or 0.68 percent.

Monsanto (NYSE:MON) Needs to Show it Can Grow Corn Seed Share

Even though Monsanto (NYSE:MON) has received a boost recently when field results revealed their SmartStax corn yields were better than competitors after earlier tests were disappointing, that may not be enough of a catalyst to push the company forward, are expectations are they'll have to prove they can grow their share in corn seeds, as they lost some to competitors over the last year.

Now the question they must answer is also if the improved results are worth the premium cost of the seeds, something DuPont (NYSE:DD) has successfully created doubt about in a significant number of farmers, helping them grow share..

Deutsche Bank (NYSE:DB) believes they'll struggle over the next year to do that, and downgraded Monsanto from "Buy" to "Hold."

“We are downgrading Monsanto to Hold as the shares are within 5% of our target and we see few near-term catalysts. While last week’s yield data put to rest lingering doubts over Monsanto’s next generation seeds, with the shares trading at a 70% premium to the S&P 500 we believe upside is limited over the next 3-6 mos. Over the next 6-12 mos, we believe Monsanto needs to grow volume and/or gain share in US corn for the shares to outperform. However, with competitors also targeting share gains in ‘11, we believe this could be a challenge," said Deutsche.

Deutsche Bank analyst David Begleiter added, “The key for Monsanto shares to outperform over the six to twelve months is for Monsanto to translate these advantages into volume growth and share gains in the key U.S. corn seed market."

Last quarter George Soros added a significant number of Monsanto shares to his fund.

Monsanto closed Monday at $60.79, falling $1.36, or 2.19 percent.