The Mosaic Company (MOS - Free Report) is set to release third-quarter 2018 results on Nov 5, after market close.
The fertilizer maker’s profits declined in second-quarter 2018, hurt 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 in the year-ago quarter.
Nevertheless, adjusted earnings of 40 cents per share beat the Zacks Consensus Estimate of 39 cents.
Revenues rose roughly 26% year over year to $2,205 million in the quarter, driven by the Vale Fertilizantes acquisition and higher sales prices. However, the figure beat the Zacks Consensus Estimate of $2,348 million.
Notably, Mosaic beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive earnings surprise of roughly 21%.
The stock has outperformed the industry in the past six months. The company’s shares have returned around 14% compared with roughly 3.8% rise of the industry.
Will the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.
Factors at Play in Q3
Mosaic, during second-quarter earnings call, raised adjusted earnings per share (EPS) guidance for 2018, considering strong business performance and lower expected effective tax rate for the year. It now expects adjusted EPS in the range of $1.45-$1.80 per share for 2018, up from the prior view of $1.20-$1.60.
The company expects phosphates sales volumes in the range of 2.1-2.4 million tons. The segment’s adjusted gross margin is expected in the band of $75-$85 per ton. Mosaic expects higher average realized selling prices to more than offset higher raw material costs.
Potash sales volumes are forecast in the range of 2.2-2.5 million tons and the adjusted gross margin is anticipated between $55 and $65 per ton. Mosaic expects higher average realized selling prices to offset the unfavorable impact of planned maintenance turnarounds in the Esterhazy and Belle Plaine mines.
Sales volumes in the Mosaic Fertilizantes segment are projected in the range of 3.2-3.6 million tons for the third quarter. The company expects adjusted gross margin for the unit between $35 per ton and $45 per ton. Mosaic envisions higher average realized selling prices and the impact of weaker local currency to more than offset the planned turnaround at the Uberaba facility.
The Zacks Consensus Estimate for third-quarter total revenues is currently pegged at $2,936 million, reflecting an expected increase of 47.9% from the year-ago quarter’s tally.
The Zacks Consensus Estimate for net sales in the Phosphates segment is currently pegged at $1,032 million for the third quarter, reflecting an estimated 32.5% rise from the year-ago quarter’s tally. Moreover, the same for the company’s Potash segment is expected to rise 21.9% year over year in the third quarter, as the Zacks Consensus Estimate is currently pegged at $578 million.
The Zacks Consensus Estimate for total sales volumes in the Potash segment is currently pegged at roughly 2.32 million tons, reflecting an expected decline of 2.1% on a sequential comparison basis. Meanwhile, the same for the company’s Phosphates segment and Mosaic Fertilizantes segments are expected to rise 9.2% and 84.3% sequentially, as the Zacks Consensus Estimate for sales volumes for these two respective segments are currently pegged at 2.51 million tons and 3.4 million tons.
Our proven model does not conclusively show that Mosaic is likely to beat estimates this quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:
Earnings ESP: Earnings ESP for Mosaic is -0.78%. The Zacks Consensus Estimate is currently pegged at 64 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mosaic currently carries a Zacks Rank #2, which when combined with a negative ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) has an Earnings ESP of +0.74% and carries a Zacks Rank #2.
Osisko Gold Royalties Ltd (OR - Free Report) has an Earnings ESP of +19.05% and carries a Zacks Rank #3.
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