The Mosaic Company (MOS - Free Report) is set to release fourth-quarter 2017 results after the market closes on Feb 19.
Mosaic reported net income of $227.5 million or 65 cents per share in third-quarter 2017 as against a profit of $39.2 million or 11 cents recorded a year ago. Adjusted earnings were 43 cents per share that beat the Zacks Consensus Estimate of 25 cents.
The company’s revenues rose roughly 1.7% year over year to $1,984.8 million in the quarter. It also topped the Zacks Consensus Estimate of $1,961 million.
Mosaic beat earnings estimates in three of the trailing four quarters while missing in one, with an average beat of 31.4%.
Mosaic has outperformed the industry over the past three months. The company’s shares have gained around 12.7% over this period compared with roughly 0.9% upside recorded by the industry.
Let's see how things are shaping up prior to this announcement.
Factors to Consider
Mosaic, in October 2017, said that it expects phosphates sales volumes in the range of 2.3-2.6 million tons for fourth-quarter 2017 compared with 2.5 million tons for the year-ago period. Average selling price, FOB plant, is expected to be in the range of $320-$350 per ton. The segment gross margin rate is expected to be in the upper single digit including an expected $9-million carry-over impact from Hurricane Irma.
Potash sales volumes have been forecasted in the range of 1.9-2.2 million tons for the fourth quarter, compared with 2 million tons in the prior-year quarter. Average selling price, FOB plant, is expected in the band of $175 to $195 per ton and the gross margin rate is anticipated to be in the upper teens, reflecting an unfavorable impact of production mix and scheduled turnarounds during the quarter.
Total sales volumes for the International Distribution segment are expected to range from 1.5-1.8 million tons for fourth-quarter 2017, compared with 1.9 million tons in the prior-year quarter. The segment gross margin is estimated to be around $20 per ton.
The Zacks Consensus Estimate for revenues for Mosaic for the to-be-reported quarter stands at $1,886 million, reflecting an increase of 1.3% from the year-ago quarter.
The Zacks Consensus Estimate for net sales for the Phosphate segment is pegged at $940 million for the fourth quarter, reflecting an estimated 20.7% rise from the third quarter. Segment sales volume is also expected to increase 15.8% sequentially as the Zacks Consensus Estimate is roughly 2.4 million tons for the fourth quarter.
Potash segment’s net sales are expected to fall 5.5% sequentially in the fourth quarter as the Zacks Consensus Estimate is pegged at $448 million. A 7.1% decrease in sales volume is anticipated as the Zacks Consensus Estimate is roughly 2.1 million tons for the fourth quarter.
Net sales for Mosaic’s International Distribution segment for the fourth quarter is projected to witness a fall of 34.4% from the third quarter as the Zacks Consensus Estimate for the fourth quarter is pegged at $610 million. Segment sales volume is also expected to decline around 32.7% sequentially as the Zacks Consensus Estimate is roughly 1.7 million tons for the fourth quarter.
The company is well placed to gain from rising global demand for fertilizers. Moreover, the acquisition of Vale Fertilizantes will help the company to capitalize on the rapidly growing Brazilian agricultural market. The buyout is also expected to deliver significant synergies. Mosaic should also benefit from its cost-reduction measures and efforts to boost production capacity.
Mosaic Company (The) Price and EPS Surprise
Our proven model does not conclusively show that Mosaic is likely to beat the Zacks Consensus Estimate this quarter. This 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. This is not the case here as you will see below:
Zacks ESP: Mosaic has an Earnings ESP of -3.77%. This is because the Most Accurate estimate is 26 cents while the Zacks Consensus Estimate is pegged at 27 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mosaic sports a Zacks Rank #1. Though a favorable rank increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks With Favorable Combination
Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Nexa Resources S.A. (NEXA - Free Report) has an Earnings ESP of +17.5% and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Veritiv Corporation (VRTV - Free Report) has an Earnings ESP of +41.03% and sports a Zacks Rank #1.
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +3.27% and carries a Zacks Rank #2.
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