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Mosaic (MOS) Up 20% in 6 Months: What's Behind the Rally?

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Shares of The Mosaic Company (MOS - Free Report) have rallied 20.4% in the past six months, significantly outperforming the industry’s decline of roughly 2%.



The company has a market cap of roughly $13.6 billion. Average volume of shares traded in the past three months was around 4,106K.  

Let’s take a look at the factors that are driving this fertilizer company.

Driving Factors

Upbeat earnings view, favorable prospects from the Vale Fertilizantes acquisition and favorable fundamentals for crop nutrients have boosted Mosaic’s shares.

In November, Mosaic raised adjusted earnings per share (EPS) guidance for 2018, considering strong business performance and lower expected effective tax rate for the year. The company expects adjusted EPS in the range of $1.80-$2.00, up from the prior view of $1.45-$1.80. It also expects adjusted EBITDA for 2018 in the range of $1.90-$2 billion, up from the previous view of $1.80-$1.95 billion.

The Vale Fertilizantes buyout makes Mosaic one of the leading fertilizer manufacturing and distribution companies in Brazil. The buyout is projected to generate $275 million of annualized improved cash flow by the end of 2020 (with $140-$160 million in synergies expected in 2018) along with providing considerable leverage to improvements in the crop nutrient business cycle.

Also, the company is well-positioned to leverage the favorable global demand environment for fertilizers. Mosaic expects phosphates sales volumes in the band of 1.7-2 million tons for the fourth quarter of 2018, reflecting underlying firmness in demand and supply dynamics as well as normal year-end seasonality. It sees rising global demand for phosphates and expects record shipments in 2019.

Mosaic also gaining from higher fertilizer prices, which boosted growth in the top line in the third quarter of 2018. Higher average realized sales prices also enabled the company achieve double-digit sales growth in the Phosphates and Potash segments.

Zacks Rank & Stocks to Consider

Mosaic currently sports a Zacks Rank #1 (Strong Buy).

A few better-ranked stocks in the basic materials space include CF Industries Holdings, Inc. (CF - Free Report) sporting a Zacks Rank #1 along with Air Products and Chemicals, Inc. (APD - Free Report) and Ingevity Corporation (NGVT - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have gained 11.3% in the past year.

Air Products has an expected long-term earnings growth rate of 11.8%. Its shares have moved up 1.9% in a year’s time.

Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have surged 24.2% in the past year.

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