It has been about a month since the last earnings report for Mosaic (MOS - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mosaic due for a breakout? 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 Q2 Earnings Beat Estimates, FY18 View Up
Mosaic saw its profits drop in the second quarter of 2018, hit by costs associated with the Vale Fertilizantes acquisition and currency translation charges. The company logged a profit of $67.9 million or 18 cents per share, down from $97.3 million or 28 cents per share it earned a year ago.
Adjusted earnings of 40 cents per share for the reported quarter squeaked past the Zacks Consensus Estimate of 39 cents.
The company’s revenues rose roughly 26% year over year to $2,205 million in the quarter, driven by the Vale Fertilizantes acquisition and higher sales prices. It, however, missed the Zacks Consensus Estimate of $2,348 million.
Revenues from Mosaic’s Phosphates segment were up around 13% year over year to $1.1 billion in the reported quarter as higher average realized sales prices more than offset reduced sales volumes due to the company’s move to temporarily idle its Plant City concentrates facility. The segment’s gross margin increased to $154 million from $76 million a year ago, driven by higher realized sales prices and operational improvements.
Potash division’s sales rose around 22% year over year to $569 million in the quarter on the back of higher sales volumes and average realized sales prices. Gross margin in the quarter was $132 million, up from $110 million reported a year ago. The rise was mainly driven by higher average realized sales prices.
Revenues from the Mosaic Fertilizantes segment went up around 53% year over year to $713 million, aided by higher sales volumes. Gross margin increased to $53 million from $25 million a year ago on the back of the Vale Fertilizantes acquisition.
Mosaic ended the quarter with cash and cash equivalents of $1,035.3 million, up around 57% year over year. Total long-term debt rose roughly 32% year over year to around $5 billion.
Cash flow from operating activities was $807 million in the reported quarter, up from $243 million a year ago. Mosaic’s capital expenditures were $201 million in the quarter.
Mosaic bumped up its adjusted earnings per share guidance for 2018 factoring in strong business performance and lower expected effective tax rate for the year. For 2018, the company now expects adjusted earnings to be in the range of $1.45-$1.80 per share, up from its prior view of $1.20-$1.60 per share.
The company also expects adjusted EBITDA for 2018 in the band of $1.80-$1.95 billion, up from its prior view of $1.70-$1.90 billion.
Mosaic expects phosphates sales volumes in the band of 2.1 million to 2.4 million tons for the third quarter of 2018. The segment’s adjusted gross margin is expected to be in the band of $75 to $85 per ton. The company expects higher average realized selling prices to more than offset higher raw material costs.
Potash sales volumes have been forecast in the range of 2.2-2.5 million tons for the third quarter and the adjusted gross margin is anticipated to be in the band of $55 to $65 per ton. Mosaic expects higher average realized selling prices to mostly offset the unfavorable impact of planned maintenance turnarounds across its Esterhazy and Belle Plaine mines.
Sales volumes for the Mosaic Fertilizantes segment have been forecast in the band of 3.2 million to 3.6 million tons for the third quarter. The company also sees adjusted gross margin for the unit in the band of $35 to $45 per ton. The company expects higher average realized selling prices and the impact of weaker local currency to more than offset the planned turnaround at the Uberaba facility.
Selling, general & administrative expenses are forecast to be between $325 million and $350 million for the year. Capital expenditure is anticipated to be in the range of $900-$1,100 million for 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 16.34% due to these changes.
Currently, Mosaic has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Mosaic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.