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Why Is Mosaic (MOS) Down 16% Since Last Earnings Report?

Zacks Equity Research
Darden Restaurants (DRI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

A month has gone by since the last earnings report for Mosaic (MOS). Shares have lost about 16% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mosaic due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Mosaic's Earnings and Revenues Top Estimates in Q4

Mosaic swung to a profit of $112.3 million or 29 cents per share in the fourth quarter of 2018 from a loss of $431.1 million or $1.23 per share in the year-ago quarter.

Adjusted earnings of 77 cents per share for the reported quarter trounced the Zacks Consensus Estimate of 57 cents.

Net sales rose roughly 20% year over year to $2,520.5 million in the quarter, mainly driven by the Vale Fertilizantes acquisition and higher sales prices. The figure also exceeded the Zacks Consensus Estimate of $2,348 million.

FY18 Results

For 2018, profits were $470 million or $1.22 per share compared with a loss of $107.2 million or 31 cents recorded in 2017. Full-year adjusted earnings were $2.12 per share, up 92% year over year.

Net sales for the year went up around 29% year over year to $9,587.3 million.
 
Segment Highlights

Net sales from Mosaic’s Phosphates segment were $926 million in the quarter, down from $1 billion in the prior-year quarter. Higher realized sales prices were more than offset by lower sales volumes. The segment’s gross margin increased to $151 million from $133 million in the year-ago quarter, mainly driven by higher realized sales prices and increased proportion of premium MicroEssentials sales.

Potash division’s sales rose around 19% year over year to $592 million in the quarter on the back of higher sales volumes and average sales prices. Gross margin in the quarter was $202 million, up from $114 million in the year-ago quarter. The rise was mainly driven by higher average sales prices that more than offset higher Canadian resource taxes.  

Net sales in the Mosaic Fertilizantes segment were $969 million, up around 86% year over year, driven by higher realized sales prices and the Vale Fertilizantes acquisition. Gross margin increased to $118 million from $32 million in the year-ago quarter on the back of better distribution margins and the addition of the acquired production business.

Financials

Mosaic ended 2018 with cash and cash equivalents of $847.7 million, down around 61% year over year. Long-term debt fell roughly 8% year over year to around $4,491.5 million.

Cash flow from operating activities was $191 million in the reported quarter, down from $411 million a year ago, impacted by unfavorable working capital changes. Mosaic’s capital expenditures were $328 million in the quarter. Cash flow from operating activities for 2018 was $1.45 billion, up from $936 million in 2017.
 
Outlook

Moving ahead, Mosaic expects its strong business and financial performance to continue this year. The company expects adjusted earnings per share in the range of $2.10-$2.50 per share for 2019. It also expects adjusted EBITDA for 2019 in the band of $2.2-$2.4 billion.

Mosaic expects phosphates sales volumes in the band of 1.6-1.9 million tons for the first quarter of 2019. 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.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -34.78% due to these changes.

VGM Scores

Currently, Mosaic has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Mosaic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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