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Bear of the Day: Mosaic (MOS)

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Mosaic (MOS - Free Report)  produces and markets concentrated phosphate and potash crop nutrients primarily for the agricultural industry worldwide. The company operates through three segments: Phosphates, Potash, and International Distribution. The stock price is largely reflected by the price of agricultural commodities, which have seen price pressure this year.

Mosaic is the Bear of the Day as it looks like it will take out 52 week lows. The stock is a Zacks Rank #5 (Strong Sell) and has been since February.

Mosaic was founded in 2004 and is based in Plymouth, Minnesota where it employs almost 9,000. The company has a market cap of $8 billion and a Forward PE of 54. The stock sports Zacks Style Scores of “D” in Growth and “C” in both Value and Momentum. The stock is down over 20% since late August after false buyout rumors, earnings and falling estimates.

Q2 results

The company reported Q4 EPS on August 2nd, where it missed on both the top and bottom line. The 66% miss on EPS was the first miss in four quarters, but it was widely expected as the stock lost half its value over that year. The corn, wheat and soybean crop has been one of the best on record this season, which has brought down commodity and potash prices. This makes Mosaics job difficult as demand for their product goes down as farmer’s margins tighten.

Estimate Revisions

Because of the demand and pricing issues Mosaic faces, estimates for the company have been coming down. Over the last 60 days, estimates have been revised lower for all time frames. For fiscal year 2016, the numbers have been taken down 31%, from $0.67 to $0.46. For next year, estimates are now seen at $0.89, down from $1.17 or 23%.

A Better Option

There are no top ranked stocks in the potash sector, but if you are looking for one then try Agrium AGU, which is a Zacks Rank #3 (Hold). The company is a leading global producer and marketer of fertilizer and a major retail supplier of agricultural products and services in both North America and Argentina. Agrium was founded in 1931, employs 15,000 and is headquartered in Calgary, Canada.

Agrium has a market cap of $12 billion and a Forward PE of 17. The stock sports a Zacks Style Score of “A” in Value.

Last quarter the company beat EPS by a 1%, while it missed slightly on revenues. Revisions to earnings estimates are trending lower in the shorter time frames, but flattening out longer term. An investor with a longer time horizon might find some success with Agrium.

For more on the Ag stocks check out this podcast.

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More Stocks to Sell. Now.

Beyond our Bear Stock of the Day, today's list of 220 Zacks Rank #5 Strong Sells demand even more urgent attention. If any are lurking in your portfolio or Watch List, they should be removed immediately. Many appear to be sound investments but, since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

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