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Mosaic (MOS) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

The Mosaic Company MOS is set to release second-quarter 2019 results before the opening bell on Aug 6.  

Mosaic’s shares are down around 13.8% year to date against the industry’s 6.3% rise.



Factors at Play in Q2

In May, the company lowered its adjusted EBITDA and adjusted earnings guidance for 2019 factoring in higher costs related to the impact of new tailings dam regulations in Brazil, the impact of production curtailments, higher Canadian resource taxes and delayed recovery in phosphate margins.

It expects phosphates sales volumes in the band of 2.3-2.6 million tons for the second quarter of 2019. The segment’s adjusted gross margin is projected in the band of $40-$50 per ton.

Potash sales volumes have been forecast in the range of 2.3-2.6 million tons for the second quarter and adjusted gross margin is projected in the band of $70-$80 per ton.

The company also expects sales volumes in the Mosaic Fertilizantes segment in the band of 2-2.3 million tons for the second quarter. The company projects gross margin for the unit in the range of $15-$25 per ton.

Notably, the company idled the Catalao mine for two months when it was working to align its mine tailings dam in compliance with the new Brazilian regulation. While the mine resumed operations in May, temporary idling is likely to affect production in the second quarter.

In June, the company announced that it will close the idled Plant City phosphates production facility in Hillsborough County, FL. Notably, the company expects to recognize a non-cash charge of up to $390 million in the second quarter related to the permanent closure of the facility. This will include an increase of the asset retirement obligation liability and asset write-offs.  

Mosaic intends to mitigate a part of closure costs by assessing innovative approaches to water management along with repurposing portion of the facility for productive usage.

What do the Estimates Indicate?

The Zacks Consensus Estimate for second-quarter consolidated revenues for Mosaic is currently pegged at $2,252 million, which suggests a rise of 2.1% from the year-ago quarter’s tally.

For the second quarter, the Zacks Consensus Estimate for total sales in the Phosphates segment is currently pegged at $1,128 million, which indicates a rise of 7.1% year over year.

The Zacks Consensus Estimate for total sales in the Potash segment is currently pegged at $685 million, which calls for a rise of 20.4% year over year.

The consensus mark for sales in the Mosaic Fertilizantes segment is currently pegged at $795 million, which indicates a rise of nearly 11.5% year over year.

What the Zacks Model Says?

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 -4.40%. The Most Accurate Estimate is at 29 cents and the Zacks Consensus Estimate is pegged at 30 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.

The Mosaic Company Price and EPS Surprise

 

The Mosaic Company Price and EPS Surprise

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

 

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows that they have the right combination of elements to post a beat this time around:

Arconic Inc. ARNC has an Earnings ESP of +0.83% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation GOLD has an Earnings ESP of +0.70% and carries a Zacks Rank #2.

Covia Holdings Corporation CVIA has an Earnings ESP of +20.00% and a Zacks Rank #3.

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The Mosaic Company (MOS) : Free Stock Analysis Report
 
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