Best stocks to invest in – Mixed Q1 for Monsanto: ETFs in Focus



Best stocks to invest in

On January 6, Monsanto Company (MON) came up with mixed results for 1Q16 with losses narrowing from the Zacks Consensus Estimate but revenues falling short. This dampened investors’ mood and pulled down its shares in the key trading session following the news release.  

1Q Earnings in Focus

The company’s bottom line came in at a loss of 11 cents per share, narrower than the Zacks Consensus Estimate of a loss of 27 cents. However, the results compared unfavorably with the year-ago earnings of 47 cents per share.

Weak business from seeds and genomics led to this revenue underperformance. First-quarter revenues of $2.22 billion, down 22.7% year over year, fell shy of the Zacks Consensus Estimate of $2.55 billion. Sales were soft for seeds and traits businesses of corn, vegetable and cotton. Revenues from Agricultural Productivity declined 34.3% year over year to $820 million.

Though there was not much spark in the quarterly results, the real twist lies in cost cut in the form jobs elimination. The company plans to do away with an additional 1,000 jobs as part of its cost-cutting program so that the company can absorb declining sales of biotech-corn seeds and added financial issues. Management expects these restructuring steps to create annual savings of $500 million by the end of 2018.

For fiscal 2016, Monsanto expects full-year fiscal 2016 earnings per share in the lower end of the $5.10–$5.60 range. Argentina’s currency devaluation is a major concern for the company. For 2016, Monsanto expects currency trends to reduce its earnings by 60 to 70 cents per share, more than its previous estimate of 35 to 40 cents per share (read: Best and Worst Performing Currency ETFs of 2015).


The fund has a Zacks Rank #3 (Hold).

ETF Impact

Courtesy of a revenue miss and a somewhat weak guidance, shares of Monsanto lost about 1.6% in the key trading session on Wednesday on slightly elevated volumes. However, the stock started recouping its losses after hours and gained about 0.7%.

Monsanto has a sizable exposure in various agricultural and materials ETFs like MSCI Global Agriculture Producers ETF (VEGI), Materials Select Sector SPDR (XLB), iShares U.S. Basic Materials ETF (IYM) and Market Vectors-Agribusiness ETF (MOO). This suggests that the performance of these funds is highly dependent on Monsanto. Below, we have highlighted some of these ETFs in detail:

VEGI in Focus

This global ETF looks to track the MSCI ACWI Select Agriculture Producers Investable Market Index and invests about $25.2 million of assets. In its 127-stock portfolio, the in-focus Monsanto takes the top spot with 14.24% allocation.

Sector-wise, materials take the top position with 49% share followed by food and beverages (19.5%). Country-wise, the U.S. accounts for about half of the portfolio while Switzerland (11.1%) and Canada (8.43%) occupy the next positions.

The ETF charges about 39 bps in fees a year and has a dividend yield of 2.49%. The fund lost 2.5% in the key trading session and 18.7% in the last one year (as of January 6, 2015).

XLB in Focus

Investors looking to tap the rise in Monsanto in ETF form can also invest in XLB. Here also, Monsanto takes up the third position with 8.8% of assets. The fund’s asset base of $2.13 billion is spread across 29 securities (see all Materials ETFs here).

The ETF relies heavily on the chemical sector which accounts for 74.1% of the asset base. XLB charges a fee of 14 basis points annually. The fund has recorded a loss of 2.6% in the key session and was off 14.5% in the last one year. XLB has a Zacks ETF Rank #4 (Sell).

IYM in Focus

This fund follows the Dow Jones U.S. Basic Materials Index, holding 51 stocks in its basket. Again, Monsanto takes the third spot at 8.8%. From a sector perspective, Chemicals make up for 75% of assets. The ETF, with about $343 million in AUM, charges 45 bps in fees. The fund was down about 17.7% from the one-year look while the fund lost about 2.7% in the key trading session. IYM has a Zacks ETF Rank #4.

MOO in Focus

Like VEGI, this fund provides exposure to the global agribusiness industry by tracking the Market Vectors Global Agribusiness Index. The fund has an asset base of $823.2 million. The ETF charges 57 bps in annual fees (read: Reap Long Term Returns from These Agribusiness ETFs).

 

In total, the fund holds 53 securities in its basket. Of these firms, the stock under consideration – Monsanto –takes the second place yet again, making up roughly 8.33% of the total assets. In terms of country allocation, U.S. (50.7%), Switzerland (8.8%) and Canada (8.1%) occupy the top three spots. The fund retreated nearly around 2% on January 4 and 0.15% in the last one year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
MONSANTO CO-NEW (MON): Free Stock Analysis Report
 
ISHARS-M GL AGR (VEGI): ETF Research Reports
 
SPDR-MATLS SELS (XLB): ETF Research Reports
 
ISHARS-US BA MA (IYM): ETF Research Reports
 
MKT VEC-AGRIBUS (MOO): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Comments

– Best stocks to invest in

Learn How To Be #1 on Google Results



Source link