Is Mosaic (MOS) Poised For A Beat This Earnings Season?

Zacks Investment Research | Oct 26, 2017 09:00PM ET

The Mosaic Company (NYSE:MOS) is set to release third-quarter 2017 results before the opening bell on Oct 31.

Mosaic reported net earnings of 28 cents in second-quarter 2017 against net loss of 3 cents per share recorded a year ago. Adjusted earnings were 29 cents per share that beat the Zacks Consensus Estimate of 23 cents.

The company’s revenues rose roughly 4.8% year over year to $1,754.6 million in the reported quarter, topping the Zacks Consensus Estimate of $1,649.4 million.

Mosaic topped earnings estimates in three of the trailing four quarters while missing in one, with an average beat of 63.4%.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

Mosaic expects phosphates sales volumes in the band of 2.2-2.5 million tons for the third quarter compared with 2.5 million tons for the same quarter in 2016. Average selling price, FOB plant, is expected to be in the range of $310-$330 per ton. The segment gross margin rate is expected to be in the band of 7-9%.

Potash sales volumes have been forecast in the range of 1.9-2.2 million tons for the third quarter, compared with 2.2 million tons in the prior-year quarter. Average selling price, FOB plant, is expected in the band of $165-$180 per ton and the gross margin rate is anticipated to be in the band of 15-18%.

Total sales volumes for the International Distribution segment are expected to range from 2.3-2.6 million tons for the third quarter, compared with 2.2 million tons in the prior-year quarter. The segment gross margin is estimated to be in the low-$20 per ton range.

Mosaic, last month, issued an update on its third-quarter business performance post Hurricane Irma. The company witnessed good demand and strong operational performance prior to the hurricane with profitability metrics tracking ahead of the third quarter guidance. Post the mayhem of Irma, Mosaic now expects roughly 250,000 to 350,000 tons of lower production in September. In addition to this, the damage to Mosaic's Bartow warehouse is anticipated to result in a loss of up to 400,000 tons of finished phosphate product.

The Zacks Consensus Estimate for net sales for the Phosphate segment is is pegged at $878 million for the third quarter, reflecting an estimated 9.9% decline from the second quarter. Segment sales volume is also expected to decline 7.7% sequentially as the Zacks Consensus Estimate is roughly 2.4 million tons for the third quarter.

Potash segment’s net sales are expected to fall 5.3% sequentially in the third quarter as the Zacks Consensus Estimate pegged at $443 million. A 3.3% decrease in sales volume is anticipated as the Zacks Consensus Estimate is roughly 2.1 million tons for the third quarter.

Net sales for Mosaic’s International Distribution segment for the third quarter is projected to witness a surge of 45.8% from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $850 million. Segment sales volume is also expected to jump around 50% sequentially as the Zacks Consensus Estimate is roughly 2.4 million tons for the third quarter.

Mosaic is expected to benefit from its efforts to boost production capacity. The company is also anticipated to gain from improving global demand for fertilizers and cost-reduction measures.

However, the company is exposed to a difficult pricing environment. Lower pricing is hurting sales and margins in its phosphate business and is expected to remain a headwind in the third quarter. Mosaic also faces a challenging operating environment in the agriculture space.

Mosaic has underperformed the Zacks Investment Research

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Written By: Zacks Investment Research

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