Wednesday, January 06, 2010

Monsanto Ignores Fundamentals

Monsanto (MON) issued their Q1 earnings and headlines the release as delivering on Guidance. The market still sold off as they did not like the losses. If Monsanto delivered on guidance the market would not have been surprised. A few things investors should be worried about.

1. They claim a 56% marginal tax rate but have losses not taxable profits. Taxes confuse most investors. Monsanto is not helping today.
2. They have not been able to reduce their SG&A to match declining revenues.
3. Their gross profit has shrunk considerably
4. Cash and equivalents have dropped by 75%
5. Accounts Receivable are up 25% on a revenue drop of some 36%.

Management is not addressing the issues. This is a large cap company that is closely watched. What is the executive thinking?