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Bear of the Day: Mosaic (MOS)

Tracey Ryniec

The Mosaic Company (MOS) is grappling with the extreme weather conditions that hit US farmers in the spring. This Zacks Rank #5 (Strong Sell) continues to see cuts to its 2019 and 2020 earnings estimates.

Mosaic makes concentrated phosphate and potash crop nutrients. It is a single source provider of phosphate and potash fertilizers and feed ingredients for the global agriculture industry.

A Miss in the Second Quarter

On Aug 6, Mosaic reported its second quarter results and missed on the Zacks Consensus Estimate by $0.18. Earnings were $0.12 versus the Zacks Consensus of $0.30.

“We’ve experienced a North American spring season that was wetter and later than any in recorded history,” said Mosaic President and CEO Joc O’Rourke.

“While our Potash and Mosaic Fertilizantes businesses continued to perform well, weakness in the phosphates market negatively impacted second quarter results."

"Moving forward, strong price increases in grains together with depleted soil nutrients in North America are expected to drive fertilizer applications significantly higher this fall," he added.

It closed its Plant City phosphates facility and accelerated the development of the K3 potash mine. Additionally it curtailed potash production at Colonsay.

Yet it still expects strong market fundamentals in the second half of 2019 and beyond.

Analysts Keep Cutting Full Year Estimates

But with the tariffs and trade war issues lingering with China, which is putting pressure on American farmers, the analysts have gotten pessimistic.

In just the last week, one analyst cut both 2019 and 2020 earnings estimates.

The 2019 Zacks Consensus Estimate has now fallen to $1.12 from $1.65 just 90 days ago.

Mosaic made $2.12 in 2018 so that's an earnings decline of 47.2%.

2020 is also going the wrong direction. The Zacks Consensus Estimate has fallen to $1.77 from $2.36 during the previous 3 months.

Are Shares Cheap?

Shares have taken a beating for most of the year and are now down 31% year-to-date.

But they're not that cheap either as those estimates are cut. They trade with a forward P/E of 18.

Patient investors do get a dividend currently yielding 1%, however.

Mosaic isn't alone in being a Zacks Rank #5 (Strong Sell). Two other fertilizer companies Nutrien Ltd (NTR) and Sociedad Quimica y Minera SA (SQM) are also #5s.

But nitrogen fertilizer giant CF Industries Holdings (CF) is expected to see earnings jump 103% this year. One analyst has raised estimates in the last week. It's a Zacks Rank #2 (Buy).

Mosaic is expected to report third quarter earnings on Nov 4, 2019.

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