The Mosaic Company (NYSE:MOS) is set to release third-quarter 2017 results before the opening bell on Oct 31.
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Zacks Investment Research
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 industry over the past three months. The company’s shares have declined around 12.5% over this period as against roughly 14.7% gain recorded by the industry.
Earnings Whispers
Our proven model shows that Mosaic is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:
Zacks ESP: Earnings ESP for Mosaic is currently +2.69%. This is because the Most Accurate estimate is 26 cents while the Zacks Consensus Estimate is pegged at 25 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Mosaic currently carries a Zacks Rank #3 which when combined with a positive ESP, makes us reasonably confident of an earnings beat.
Conversely, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Stocks With Favorable Combination
Here are some companies in the basic material space you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:
Westlake Chemical Corporation (NYSE:WLK) has an Earnings ESP of +5.14% and flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intrepid Potash, Inc (NYSE:IPI) has an Earnings ESP of +14.3% and flaunts a Zacks Rank #1.
CF Industries Holdings, Inc. (NYSE:CF) has an Earnings ESP of +1.83% and carries a Zacks Rank #2.
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Westlake Chemical Corporation (WLK): Free Stock Analysis Report
CF Industries Holdings, Inc. (CF): Free Stock Analysis Report
Mosaic Company (The) (MOS): Free Stock Analysis Report
Intrepid Potash, Inc (IPI): Free Stock Analysis Report
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