Susquehanna analyst Don Carson downgraded Monsanto
Company (NYSE: MON) from Positive to Neutral, while
raising its price target from $125 to $128.
The downgrade is not a result of increasing headwinds or poor performance, but rather because the 9-percent upside from
Bayer AG (ADR) (OTC: BAYRY)'s $128 per share acquisition is below
Susquehanna’s 15-percent minimum for a Positive rating.
Why Downgrade If Acquisition Is All But Certain?
Carson is confident that the Bayer acquisition will close, albeit with some revisions at the suggestion of antitrust authorities
in the U.S. and South Africa, but notes that the risk of a block cannot be dismissed.
Carson’s concerns stem from political considerations more so than economic ones.
The consensus expectation that the deal will close is based
largely on ChemChina’s acquisition of Syngenta AG (ADR) (NYSE: SYT) and the Dow Chemical Co (NYSE: DOW)–E I Du Pont De Nemours And Co (NYSE: DD) merger, but neither resulted in a foreign entity
taking ownership of a globally-leading U.S. company.
Trumptastrophy In The Making?
Bayer has said it would keep Monsanto’s headquarters in St. Louis as well as add 3,000 jobs, but Germany has been critical of
the Trump administration — a matter that could boost protectionist sentiments.
Failure of the deal to go through could mean a downside of $18 from the price target to $110. Other non-acquisition headwinds
could push the share price down further to around $100.
Monsanto will report its third-quarter fiscal 2017 earnings on Wednesday. Carson noted that Q3 is typically the company’s second
strongest each year. He also expects management to raise the low end of its EPS guidance, currently at $4.50–4.90 compared to his
estimated $4.85.
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Upgrades, Downgrades For June 27, 2017
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Image Credit: By Luther Blissett - Flickr: DSC07535, CC BY-SA 2.0, via Wikimedia Commons
Latest Ratings for MON
Date |
Firm |
Action |
From |
To |
Jun 2017 |
Susquehanna |
Downgrades |
Positive |
Neutral |
Feb 2017 |
RBC Capital |
Initiates Coverage On |
|
Sector Perform |
Nov 2016 |
OTR Global |
Upgrades |
Negative |
Mixed |
View More Analyst Ratings for
MON
View the Latest Analyst Ratings
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