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Why Is Mosaic (MOS) Up 20.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Mosaic (MOS - Free Report) . Shares have added about 20.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mosaic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Mosaic's Earnings and Sales Surpass Estimates in Q2

Mosaic logged net income of $47.4 million or 12 cents per share in second-quarter 2020 against a net loss of $233.1 million or 60 cents in the year-ago quarter.

Barring one-time items, adjusted earnings per share were 11 cents that beat the Zacks Consensus Estimate of a loss of 4 cents.

Net sales fell 6.1% year over year to $2,044.7 million in the quarter. However, the figure beat the Zacks Consensus Estimate of $1,871.5 million.

Segment Highlights

Net sales in the Phosphates segment were $763 million in the quarter, down 16.8% year over year due to lower sales prices. The segment’s gross margin improved to $7 from a loss of $7 million in the year-ago quarter as lower raw material costs, strong volumes and production cost improvement overcame price declines.

Potash division’s net sales dropped 7.3% year over year to $555 million mainly due to lower prices, which was partly offset by higher sales volumes during the North America spring planting season. Gross margin in the quarter was $132 million, down 27.1% year over year, as lower prices more than offset lower production costs and higher sales volumes.

Net sales in the Mosaic Fertilizantes segment were $787 million, down 5.5% year over year. Results were affected from lower prices that more than offset stronger sales volumes. Gross margin increased to $101 million from $35 million in the year-ago quarter due to lower turnaround and idle costs as well as considerable currency tailwinds.

Financials

At the end of first six months, Mosaic had cash and cash equivalents of $1,073.3 million, up 167.1% year over year. Long-term debt fell 0.3% year over year to $4,527.9 million.

Net cash provided by operating activities rose 62% year over year to $813.7 million in the reported quarter. The company’s capital expenditures were $257 million in the quarter.

Outlook

For 2020, Mosaic now expects depreciation, depletion and amortization of $860-$910 million compared with $910-$920 million expected earlier. The company continues to anticipate net interest expenses of $180-$190 million for 2020. Capital expenditure is expected to be around $1.2 billion for 2020.
The company also stated that phosphate fertilizer products prices have strengthened globally. This reflects tightening supply and demand balance. Further, it expects potash prices to be stable. The risk of coronavirus is also expected to persist throughout the remainder of 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 129.29% due to these changes.

VGM Scores

Currently, Mosaic has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Mosaic has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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