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Here's Why The Mosaic Company Dropped 17.8% in May

Maxx Chatsko, The Motley Fool

What happened

Shares of The Mosaic Company (NYSE: MOS) fell nearly 18% last month, according to data provided by S&P Global Market Intelligence. The company announced first-quarter 2019 operating results that showed resilience in a tough market environment, but management lowered full-year 2019 guidance for several financial metrics.

That was more than Wall Street was willing to tolerate. It's not difficult to see why analysts are taking the updated guidance ranges so harshly. Farmers in the United States have been helpless against historic flooding and rains, which has significantly delayed the planting season in the Corn Belt. Trade wars have caused a global surge in soybean inventories, which is causing many acres to switch to corn. Simply put, there is no shortage of headwinds and sources of uncertainty in the global agricultural markets right now.

A chart on a chalkboard showing a steady rise and then a sudden descent.

Image source: Getty Images.

So what

The Mosaic Company actually delivered a pretty solid operating performance in the first quarter of 2019. Consider how the results stack up to the year-ago period: 

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$1.90 billion

$1.93 billion

(2%)

Gross profit

$309 million

$242 million

28%

Operating income

$202 million

$81 million

150%

Net income

$131 million

$42 million

209%

Diluted earnings per share (EPS)

$0.34

$0.11

209%

Data source: Press release.

As the table above shows, operating efficiency helped deliver a solid quarterly performance. In fact, the business reduced the cost of goods sold by $100 million, or 6%, in the year-over-year comparison period. That allowed more profit to trickle down the income statement.

Of course, all eyes were on full-year 2019 guidance. After initially expecting adjusted EBITDA in the range of $2.2 billion to $2.4 billion, management reduced expectations to a range of $2.0 billion to $2.3 billion. Management also reduced adjusted EPS guidance from a previous midpoint of $2.30 to a new midpoint of just $1.75. 

Now what

While investors never enjoy seeing full-year financial guidance reduced, The Mosaic Company is delivering respectable operations, given all of the headwinds. Wall Street isn't taking any chances, however, and has sent shares tumbling 24% since the beginning of 2019. Given the multiyear rut of the global fertilizer markets, investors should be cautious, too.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.