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Mosaic's (MOS) Q3 Earnings Top Estimates, Ups FY18 View

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The Mosaic Company (MOS - Free Report) logged a profit of $247.5 million or 64 cents per share in the third quarter of 2018 compared with $227.5 million or 65 cents in the year-ago quarter.

Adjusted earnings of 75 cents per share for the reported quarter beat the Zacks Consensus Estimate of 64 cents.

Net sales rose roughly 47.5% year over year to $2,928.1 million in the quarter, mainly driven by the Vale Fertilizantes acquisition and higher average sales prices across all segments. The figure missed the Zacks Consensus Estimate of $2,936.5 million.

The Mosaic Company Price, Consensus and EPS Surprise

 

The Mosaic Company Price, Consensus and EPS Surprise | The Mosaic Company Quote

Segment Highlights

Net sales from Mosaic’s Phosphates segment amounted to $1 billion in the quarter, up from $779 million in the prior-year quarter. Higher sales were driven by higher average sales prices and sales volumes. The segment’s gross margin increased to $180 million from $67 million in the year-ago quarter, mainly driven by higher average sales prices and operational improvements, which reduced controllable operating costs.

Potash division’s sales rose around 28.5% year over year to $609 million in the quarter on the back of higher sales volumes and average sales prices. Gross margin in the quarter was $161 million, up from $99 million in the year-ago quarter. The rise was primarily driven by higher average sales prices, which was partly offset by the timing of turn-around activities.  

Net sales in the Mosaic Fertilizantes segment were $1.4 billion, up from $806 million in the year-ago quarter. Gross margin increased to $152 million from $52 million in the year-ago quarter on the back of the Vale Fertilizantes acquisition along with higher margins in the legacy distribution business.

Financials

As of Sep 30, Mosaic had cash and cash equivalents of $1,029.9 million, up around 50.2% year over year. Total long-term debt rose roughly 21.5% year over year to around $4,523.1 million.

Cash flow from operating activities was $524 million in the reported quarter, up from $136 million a year ago. Mosaic’s capital expenditures were $241 million in the quarter.

Outlook

Mosaic raised adjusted earnings per share (EPS) guidance for 2018, considering strong business performance and lower expected effective tax rate for the year.

For 2018, the company now expects adjusted EPS in the range of $1.80-$2.00 per share, up from the prior view of $1.45-$1.80 per share.

The company also expects adjusted EBITDA for 2018 in the band of $1.90-$2 billion, up from the previous view of $1.80-$1.95 billion.

Mosaic expects phosphates sales volumes in the band of 1.7-2 million tons for the fourth quarter of 2018. The segment’s adjusted gross margin is expected in the band of $65-$75 per ton. Per the company, outlook for the Phosphates segment reflects underlying firmness in demand and supply dynamics as well as normal year-end seasonality.

Potash sales volumes have been forecast in the range of 2.2-2.5 million tons for the fourth quarter and the adjusted gross margin is anticipated in the band of $80 to $90 per ton. Mosaic expects market conditions to stay strong in potash along with high operating rates in the three Canadian mines.

Sales volumes in the Mosaic Fertilizantes segment have been forecast in the band of 1.9-2.2 million tons for the fourth quarter. The company also projects adjusted gross margin for the unit in the band of $35-$45 per ton. Per the company, impacts of the higher average realized selling prices are likely to be partly offset by the strengthening of the Brazilian Real relative to the U.S. Dollar. Additionally, Mosaic continues to integrate production and distribution assets to optimize revenues. The move is expected to boost margins in the fourth quarter.

Price Performance

Mosaic’s shares have gained 16.9% in the past six months compared with the industry’s 11.2% rise.



 

Zacks Rank & Other Stocks to Consider

Mosaic currently sports a Zacks Rank #1 (Strong Buy).

A few other top-ranked stocks in the basic materials space are Methanex Corporation (MEOH - Free Report) , CF Industries Holdings, Inc. (CF - Free Report) and KMG Chemicals, Inc. , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex has expected long-term earnings growth rate of 15%. Its shares have rallied 26.7% in the past year.

CF Industries has expected long-term earnings growth rate of 6%. Its shares have gained 34.1% in a year.

KMG Chemicals has expected long-term earnings growth rate of 28.5%. Its shares have rallied 43.2% in the past year.

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