Monsanto Prunes Guidance Again

It is just an annoying rule of thumb that companies on the wrong side of earnings momentum typically have multiple revisions before it is all said and done.

Enter Monsanto (NYSE: MON).

Monsanto revised guidance (again) this morning; declaring that earnings for the full year were going to come in at the low end of the management's guidance range and below the current average guess by analysts. Presumably the stock is going to get thumped again and much of the positive momentum in the stock is going to evaporate.

Not withstanding a decent little rally a few weeks ago, Monsanto has been a lousy stock for a while now. The company is getting pummeled between the twin troubles of a major downward reset in the herbicide business and a similar (if not so large) reset in the company's core seed business. Simply put, the company got too full of itself - pushing prices up and up and promising farmers that the higher seed costs would pay for themselves in higher yields. Unfortunately, Monsanto's hype and arrogance got ahead of its results.

Now it is payback time. Although I have not seen any credible research that suggests Monsanto's long-term viability or competitiveness is at risk, there is little doubt that the likes of DuPont (NYSE: DD) and Syngenta (NYSE: SYT) are going to gleefully profit from Monsanto's problems.

I am hoping that Monsanto has more or less bottomed out in terms of guidance and near-term financial performance. Although I bought this stock for the long-term picture and the long-term value I see in the shares, it is not exactly fun to see the stock smacked around in the short term (to say nothing of the fact that poor short-term performance eventually forces you to revise your long-term outlook if it goes on long enough).

I still think these shares are worth quite a bit more than today's price, but anybody thinking about buying in needs to be aware that the short-term momentum is definitely negative and there could be more short-run pain before the long-run gain.

Disclosure - I own shares of Monsanto