Mosaic (MOS) To Post Q1 Earnings: What's In The Offing?

The Mosaic Company (NYSE:MOS) is set to release first-quarter 2018 results after the market closes on May 7.

Mosaic recorded net loss of $431 million or $1.23 per share in the fourth quarter of 2017, against net income of $12 million or 3 cents a year ago. Adjusted earnings were 34 cents per share for the quarter that topped the Zacks Consensus Estimate of 27 cents.

The company’s revenues rose roughly 10.5% year over year to $2,091.9 million in the quarter, beating the Zacks Consensus Estimate of $1,886 million.

Mosaic beat earnings estimates in three of the trailing four quarters while missed in one, with an average beat of 8.75%.

Mosaic has outperformed the industry over the past six months. The company’s shares have gained around 20% over this period compared with roughly 1.9% upside recorded by the industry.

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

Factors to Consider

Mosaic, in its fourth-quarter call, said that it expects phosphates sales volumes in the band of 1.9 million to 2.2 million tons for the first quarter of 2018. The segment gross margin is expected to be in the band of $55 to $65 per ton.

Potash sales volumes have been forecast in the range of 1.7-2 million tons for the first quarter and the gross margin is anticipated to be in the band of $50 to $60.

For 2018, the company expects adjusted earnings to be in the range of $1-$1.5 per share. Selling, general & administrative expenses are forecasted to be between $325 million and $350 million for the year. Capital expenditure is anticipated to be in the range of $900-$1,100 million in 2018.

The Zacks Consensus Estimate for revenues for Mosaic for the to-be-reported quarter stands at $1,877 million, reflecting an increase of 18.9% from the year-ago quarter.

The Zacks Consensus Estimate for net sales for the Phosphate segment is pegged at $893 million for the first quarter, reflecting an estimated 6.4% rise from the year ago quarter. Potash segment’s net sales are expected to rise 2.7% year over year in the first quarter as the Zacks Consensus Estimate is pegged at $425 million. Net sales for Mosaic’s International Distribution segment for the first quarter is projected to witness an increase of 28.5% from the prior year quarter as the Zacks Consensus Estimate for the first quarter is pegged at $626 million.

Mosaic is exposed to still weak agricultural market fundamentals. However, it should gain from rising global demand for fertilizers. The company expects higher demand for both phosphate and potash to continue this year. It envisions 2018 to be another record year for global shipments of both products. Mosaic also gained from higher realized prices for phosphate and potash in the fourth quarter, which is expected to continue in the March quarter.

The Vale Fertilizantes acquisition is also expected to deliver significant synergies. The acquisition has allowed the company to capitalize on the rapidly growing Brazilian agricultural market. Mosaic should also benefit from cost reduction actions and capacity expansion.

The Mosaic Company Price and EPS Surprise

Earnings Whispers

Our proven model does not show that Mosaic is likely to beat the Zacks Consensus Estimate 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 not the case here as you will see below:

Zacks ESP: Mosaic has an Earnings ESP of +11.35%. This is because the Most Accurate estimate is 27 cents while the Zacks Consensus Estimate is pegged at 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Mosaic currently has a Zacks Rank #5 (Strong Sell). Note that stocks with a Zacks Rank #4 (Sell) or 5 should never be considered going into an earnings announcement.

Stocks With Favorable Combination

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

Koppers Holding Inc. (NYSE:KOP) has an Earnings ESP of +5.00% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation (NYSE:WLK) has an Earnings ESP of +1.18% and flaunts a Zacks Rank #1.

Univar Inc. (NYSE:UNVR) has an Earnings ESP of +2.63% and carries a Zacks Rank #2.

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