Monsanto reports first-quarter earnings January 5

What’s Happening

Seed maker Monsanto is due to report its first-quarter results ahead of the market open on January 5. The consensus calls for a profit of $ 0.01 for the quarter, versus a loss of $ 0.11 during the same period last year. The stock has gained 6.9% this year.

Technical Analysis

MON was recently trading at $ 105.30, down $ 8.96 from its 12-month high and $ 21.57 above its 12-month low. Overall technical indicators for MON are neutral with a weak upward trend. The stock has recent support above $ 104.10, and recent resistance below $ 106.15. Of the 11 analysts who cover the stock, six rate it a “strong buy”, four rate it a “hold”, and one rates it a “sell”. The stock receives S&P Capital IQ’s 4 STARS “Buy” ranking.

Analyst’s Thoughts

Monsanto has done little to impress Wall Street during the second half of the year, and as such the stock has been stuck in a fairly tight sideways trend since the beginning of summer. MON shares have trended higher since the election, as shares moved in sympathy to the overall market, but the stock is once again stuck in a sideways patter, and in order for the stock to move higher, the company is really going to need to impress with its Q1 numbers. The fiscal first quarter is never a great quarter for the company, which generates the vast majority of its profits during the spring and summer months, but the consensus is for a small profit of a penny, which would be much better than the $ 0.11 loss it recorded during the same period last year, and the street is expecting results to be even slightly better, with a whisper number of $ 0.04 for the quarterly profit. The higher whisper number suggests that analysts believe the company’s underlying business is functioning better than previously believed, but it also sets a higher expectation for the company’s quarterly results. Even if the company tops the penny estimate, Wall Street will need to see earnings of $ 0.04 or better for shares to breakout of the current sideways trend. MON is a fairly volatile stock, with a beta of 1.1, which combined with a trailing P/E of 35.2 suggests that potential investors might be better off waiting until after the report before establishing a new position.

Stock Only Trade

We would not look at setting up a stock-only trade on MON at this time. We will revisit the situation following the company’s quarterly report.

Bullish Trade

If you want a bullish hedged trade on the stock, consider an April 90/95 bull-put credit spread for a 25-cent credit. That’s a potential 5.3% return (17.1% annualized*) and the stock would have to fall 9.5% to cause a problem.

Bearish Trade

There are no bearish hedged trades that we like on the stock at this time.

Covered Call Trade

The options are not priced favorably at this time for setting up a covered call position on the stock.