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A month has gone by since the last earnings report for Mosaic (MOS). Shares have lost about 9.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Mosaic Misses Earnings and Revenues Estimates in Q3
Mosaic reported net income of $372 million or 97 cents per share in third-quarter 2021 against a loss of $6.2 million or 2 cents in the year-ago quarter. The company’s third-quarter results were strongest in more than a decade, gaining from higher prices and its transformation efforts in the quarter.
Barring one-time items, adjusted earnings per share were $1.35, which missed the Zacks Consensus Estimate of $1.59.
Revenues rose around 44% year over year to $3,418.6 million in the quarter but missed the Zacks Consensus Estimate of $3,802.9 million. Sales were driven by higher prices that more than offset reduced volumes.
Net sales in the Phosphates segment rose around 75% year over year to $1,300 million in the quarter, driven by increased prices. Sales volumes in the segment slipped approximately 11% to 1.8 million tons. The segment’s gross margin per ton improved significantly to $198 from $11 in the year-ago quarter as better pricing more than offset reduced volumes and higher raw material costs.
Potash division’s net sales climbed around 27% year over year to $589 million driven by higher prices. Sales volumes in the segment declined roughly 22% to 1.8 million tons. Gross margin per ton in the quarter shot up to $131, increasing more than two times year over year.
Net sales in the Mosaic Fertilizantes segment were $1.8 billion, up around 64% driven by higher year-over-year prices. Sales volume fell roughly 6% to 3.4 million tons. Gross margin per ton in the quarter was $99, shooting up 102% year over year.
At the end of the quarter, Mosaic had cash and cash equivalents of $843 million, up around 32% year over year. Long-term debt fell roughly 12.7% to $3,947.7 million.
Net cash provided by operating activities increased roughly 19.4% year over year to $422.7 million in the reported quarter.
The company’s board also approved a 50% increase in the targeted annual dividend to 45 cents per share, effective with the next declaration, which is expected in December 2021. It also repurchased 956,404 shares at an average price of $35.72 per share through Oct 31, 2021.
Moving ahead, the company noted that it expects strong agricultural commodity pricing trends to continue through the fourth quarter of 2021, driving demand for fertilizers.
Going forward, the company expects upward pricing momentum to continue, with about 90% of fourth-quarter sales committed and priced, and some commitments are as far as the second quarter of 2022 being requested by certain customers. Average realized prices for phosphate in the fourth quarter are expected to be $55-$65 per ton higher than the prior quarter. Fourth-quarter phosphate raw material costs per finished ton are expected to be $5-$10 higher than the prior quarter. Potash’s average realized prices are expected to be $110-$130 per ton higher than the third quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 23.04% due to these changes.
At this time, Mosaic has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Mosaic has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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