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Mosaic (MOS) Up 38% in 6 Months: What's Behind the Rally?

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Shares of The Mosaic Company (MOS - Free Report) have surged around 38% over the past six months. The company has also outperformed its industry’s growth of roughly 29% over the same time frame.  

Mosaic, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $12.5 billion. Average volume of shares traded in the last three months was around 3,843.8K. Mosaic has an expected long-term earnings per share growth rate of 7%.

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


What’s Working in Favor of MOS?

Buoyant earnings outlook, strong demand and pricing fundamentals for crop nutrients and upbeat prospects from the Vale Fertilizantes acquisition are contributing to the rally in Mosaic’s shares.

Mosaic is gaining from higher fertilizer prices, which contributed to strong growth in its top line in second-quarter 2018. Higher average realized sales prices also helped the company to achieve double-digit sales growth across its Phosphates and Potash segments in the quarter. Mosaic expects to continue to benefit from higher prices in the third quarter.

Mosaic, in August, also raised 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 in the range of $1.45-$1.80 per share, up from the prior view of $1.20-$1.60.

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.

Earnings estimates for Mosaic have also moved up over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 10.4% to $1.70. The Zacks Consensus Estimate for third-quarter 2018 has also shot up 16.4% over the same timeframe to 64 cents.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of 55.9%. For the third quarter, earnings are expected to rise 48.8% year over year.

Mosaic is strongly positioned to leverage the rising global demand for fertilizers. In particular, it is seeing strong demand for nutrients in India, a major import market. Mosaic expects market conditions to improve and anticipates demand for phosphate and potash to continue rising in 2018. It envisions 2018 to be another record year for global shipments of both nutrients.

The acquisition of Vale Fertilizantes business also makes Mosaic one of the leading fertilizer manufacturing and distribution companies in Brazil. The acquisition has allowed the company to capitalize on the rapidly growing Brazilian agricultural market. The acquisition is expected to be accretive to Mosaic's earnings per share in 2018 and the company expects to realize around $100 million in synergies from the buyout this year.

The Mosaic Company Price and Consensus


The Mosaic Company Price and Consensus | The Mosaic Company Quote

Stocks to Consider

Stocks worth considering in the basic materials space include ArcelorMittal (MT - Free Report) , BHP Billiton Limited (BHP - Free Report) and Nucor Corporation (NUE - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ArcelorMittal has an expected long-term earnings growth rate of 4.8%. The company’s shares have gained around 25% in a year.

BHP Billiton has an expected long-term earnings growth rate of 5.3%. The company’s shares have gained around 23% in a year.

Nucor has an expected long-term earnings growth rate of 12%. The company’s shares have gained around 14% in a year.

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