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Mosaic (MOS) to Report Q3 Earnings: A Beat in the Cards?
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Mosaic (MOS - Free Report) is set to release its third-quarter 2016 results before the opening bell on Nov 1.
In the last quarter Mosaic reported a loss of $10 million or $0.03 per share, as against a profit of $391 million or $1.08 per share recorded a year ago. Earnings, barring one-time items, were 6 cents per share that missed the Zacks Consensus Estimate of 18 cents.
Let's see how things are shaping up prior to this announcement.
Factors to Consider
Mosaic, in its second-quarter 2016 call, said that it expects potash prices to rise moderately in the back half of 2016. The company anticipates phosphates sales volumes in the band of 2.4-2.7 million tons for the third quarter of 2016 versus 2 million tons in third-quarter 2015.
Average selling price for the third quarter is projected to be in the band of $310-$340 per ton. The segment’s gross margin for the quarter is expected to be roughly 10%, while operating rate is estimated to be around 85%.
Potash sales volumes have been projected in the range of 1.8-2.1 million tons for the third quarter versus 1.6 million tons a year ago. Average selling price for the quarter is expected in the range of $160-$175 per ton. The segment’s gross margin is expected to be in the mid single digits in the third quarter.
Mosaic is facing a challenging business environment in agriculture and there is a prevailing negative sentiment among agriculture investors that can create uncertainty in the near term. Depressed crop pricing has created an uncertainty on nutrient consumption.
Mosaic, like other fertilizer makers, is exposed to a still challenging pricing environment. Agricultural commodity prices in general remain weak. Moreover, potash prices remain under strain due to elevated supply. Global capacity expansion, lower farm income and a strong U.S. dollar continue to exert pressure on fertilizer prices.
Further, Mosaic has idled its potash mine in Colonsay, Saskatchewan. The fertilizer maker took this action to meet customer demand amid challenging potash market conditions. Roughly 330 employees received temporary layoff notices as a result of this move. The Colonsay mine's proven production capacity is 2.6 million tons a year. Idling of the mine is part of Mosaic’s actions to cut production to cope with lower global potash demand and prices. It will allow the company to meet its customers' needs and reduce production costs.
Mosaic should benefit from its efforts to boost production capacity and acquisitions. The company will also gain from improving global demand for fertilizers in second-half 2016. The company sees a strong second-half with improving global demand for the balance of the year. Potash demand is expected to rise with the signing of new contracts with Chinese customers that will trigger pent-up demand from other major consumer markets including India.
Our proven model shows that Mosaic is likely to beat earnings because it has the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here as you will see below.
Zacks ESP: The Earnings ESP for Mosaic is +54.55%. This is because the Most Accurate Estimate is 17 cents, while the Zacks Consensus Estimate is pegged much lower at 11 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Mosaic has a Zacks Rank #3.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
Albemarle Corporation (ALB - Free Report) has an Earnings ESP of +8.64% and a Zacks Rank #3.
Cabot Corporation (CBT - Free Report) holds a Zacks Rank #2 and has Earnings ESP of +7.45%.
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Mosaic (MOS) to Report Q3 Earnings: A Beat in the Cards?
Mosaic (MOS - Free Report) is set to release its third-quarter 2016 results before the opening bell on Nov 1.
In the last quarter Mosaic reported a loss of $10 million or $0.03 per share, as against a profit of $391 million or $1.08 per share recorded a year ago. Earnings, barring one-time items, were 6 cents per share that missed the Zacks Consensus Estimate of 18 cents.
Let's see how things are shaping up prior to this announcement.
Factors to Consider
Mosaic, in its second-quarter 2016 call, said that it expects potash prices to rise moderately in the back half of 2016. The company anticipates phosphates sales volumes in the band of 2.4-2.7 million tons for the third quarter of 2016 versus 2 million tons in third-quarter 2015.
Average selling price for the third quarter is projected to be in the band of $310-$340 per ton. The segment’s gross margin for the quarter is expected to be roughly 10%, while operating rate is estimated to be around 85%.
Potash sales volumes have been projected in the range of 1.8-2.1 million tons for the third quarter versus 1.6 million tons a year ago. Average selling price for the quarter is expected in the range of $160-$175 per ton. The segment’s gross margin is expected to be in the mid single digits in the third quarter.
Mosaic is facing a challenging business environment in agriculture and there is a prevailing negative sentiment among agriculture investors that can create uncertainty in the near term. Depressed crop pricing has created an uncertainty on nutrient consumption.
Mosaic, like other fertilizer makers, is exposed to a still challenging pricing environment. Agricultural commodity prices in general remain weak. Moreover, potash prices remain under strain due to elevated supply. Global capacity expansion, lower farm income and a strong U.S. dollar continue to exert pressure on fertilizer prices.
Further, Mosaic has idled its potash mine in Colonsay, Saskatchewan. The fertilizer maker took this action to meet customer demand amid challenging potash market conditions. Roughly 330 employees received temporary layoff notices as a result of this move. The Colonsay mine's proven production capacity is 2.6 million tons a year. Idling of the mine is part of Mosaic’s actions to cut production to cope with lower global potash demand and prices. It will allow the company to meet its customers' needs and reduce production costs.
Mosaic should benefit from its efforts to boost production capacity and acquisitions. The company will also gain from improving global demand for fertilizers in second-half 2016. The company sees a strong second-half with improving global demand for the balance of the year. Potash demand is expected to rise with the signing of new contracts with Chinese customers that will trigger pent-up demand from other major consumer markets including India.
MOSAIC CO/THE Price and EPS Surprise
MOSAIC CO/THE Price and EPS Surprise | MOSAIC CO/THE Quote
Earnings Whispers
Our proven model shows that Mosaic is likely to beat earnings because it has the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here as you will see below.
Zacks ESP: The Earnings ESP for Mosaic is +54.55%. This is because the Most Accurate Estimate is 17 cents, while the Zacks Consensus Estimate is pegged much lower at 11 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Mosaic has a Zacks Rank #3.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
The Chemours Company (CC - Free Report) has an Earnings ESP of +25.71% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle Corporation (ALB - Free Report) has an Earnings ESP of +8.64% and a Zacks Rank #3.
Cabot Corporation (CBT - Free Report) holds a Zacks Rank #2 and has Earnings ESP of +7.45%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>