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Mosaic (MOS) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

The Mosaic Company MOS is set to release first-quarter 2019 results after the bell on May 6. The fertilizer maker is expected to gain from the Vale Fertilizantes acquisition and its cost management initiatives in the quarter. However, it will likely face pricing weakness in the quarter along with some pressure on volumes.

Mosaic’s shares are down around 11.6% year to date, underperforming the roughly 6.4% rise recorded by the industry.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Mosaic, during its fourth-quarter call, said that it expects its strong business and financial performance to continue this year. It sees balanced supply and demand for both phosphates and potash in 2019.

The company expects phosphates sales volumes in the band of 1.6-1.9 million tons for the first quarter. The segment’s gross margin is forecast in the band of $40-$50 per ton.

Potash sales volumes have been forecast in the range of 1.7-2 million tons for the first quarter and gross margin is projected in the band of $90-$100 per ton.

The company also expects sales volumes in the Mosaic Fertilizantes segment in the band of 1.3-1.6 million tons for the first quarter. The company also projects gross margin for the unit in the range of $40-$50 per ton.

The Zacks Consensus Estimate for first-quarter total revenues is currently pegged at $1,885 million, reflecting an expected decline of 2.5% from the year-ago quarter’s tally.

Factors to Consider

The Vale Fertilizantes acquisition is expected to continue to support the company’s revenues in the March quarter. The buyout has allowed Mosaic to capitalize on the rapidly growing Brazilian agricultural market. The company has completed the integration of the acquired business and realized net synergies of $158 million in 2018. It expects to achieve $275 million of annualized net synergy target in 2019.

The company should also gain from its cost management actions in the to-be-reported quarter. It is making progress in controlling its per ton SG&A expenses.

Mosaic gained from higher fertilizer prices in the last reported quarter, which drove its top line. However, the company is expected to face some pricing weakness in the first quarter. Seasonal price declines will likely affect the company’s sales and margins in the quarter.

Some pressure on phosphate sales volumes are also likely due to unfavorable impacts of the weak fall application season in North America as a result of bad weather. Volumes in the Mosaic Fertilizantes unit are also likely to be affected by seasonal sluggishness in Brazil.

The Mosaic Company Price and EPS Surprise

 

The Mosaic Company Price and EPS Surprise

The Mosaic Company price-eps-surprise | The Mosaic Company Quote

Zacks Model

Our proven model does not 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. That is not the case here, as you will see below:

Earnings ESP: Earnings ESP for Mosaic is -13.33%. This is because the Most Accurate Estimate is currently pegged at 20 cents while the Zacks Consensus Estimate stands at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mosaic carries a Zacks Rank #3, 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 That Warrant a Look

Here are some other companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

Intrepid Potash, Inc. IPI has an Earnings ESP of +25.00% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Eldorado Gold Corporation EGO has an Earnings ESP of +21.05% and carries a Zacks Rank #3.

Bunge Limited BG has an Earnings ESP of +5.00% and carries a Zacks Rank #3.

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