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Mosaic Downgraded to Strong Sell

Zacks Equity Research

On Nov 8, Zacks Investment Research downgraded The Mosaic Company ( MOS) to a Zacks Rank #5 (Strong Sell).


Why the Downgrade?


The Minnesota-based fertilizer maker had a lackluster third-quarter 2013, reported on Nov 5, with profit tumbling 70% year over year to $124 million (or 29 cents per share) from $417 million (or 98 cents per share) a year ago. The bottom line was hit by lower potash and phosphate pricing, cautious buyer behavior and a late fall application season in North America. 


On an adjusted basis (excluding negative impact of 22 cents per share mainly resulting from the company’s move to divest assets), Mosaic’s earnings of 51 cents per share fell shy of the Zacks Consensus Estimate by a nickel.


Revenues fell roughly 28% year over year to $1,908.7 million, falling short of the Zacks Consensus Estimate of $2,071 million. Double-digit declines across phosphate and potash franchises on lower selling prices dragged down the top line. The company witnessed lower sales volumes in both businesses in the quarter. 


Mosaic said that it will sell its salt operation and shutter a potash mine in Hersey, Mich. The company will also close underperforming distribution businesses in Argentina and Chile. While Mosaic envisions healthy demand in North America for the balance of 2013 based on excellent crop nutrient affordability, it expects a challenging pricing environment.


Following the third quarter earnings announcement, the Zacks Consensus Estimate for 2013 for Mosaic has gone down 4.4% to $3.02 per share. Similarly, the Zacks Consensus Estimate for 2014 fell 3.5% to $2.99.


Other Stocks to Consider


Other companies in the basic materials sector worth considering are Methanex Corporation ( MEOH), The Scotts Miracle-Gro Co. ( SMG) and BASF SE ( BASFY). While Methanex holds a Zacks Rank #1 (Strong Buy), both Scotts Miracle-Gro and BASF retain a Zacks Rank #2 (Buy).

Read the Full Research Report on MOS
Read the Full Research Report on BASFY
Read the Full Research Report on SMG
Read the Full Research Report on MEOH

Zacks Investment Research