Mosaic's (MOS) Earnings And Sales Trail Estimates In Q2

The Mosaic Company (NYSE:MOS) swung to a net loss of $233.1 million or 60 cents per share in second-quarter 2019 from a profit of $67.9 million or 18 cents in the year-ago quarter. The bottom line includes $284 million noncash after-tax charge related to the permanent closure of the Plant City phosphate facility.

Barring one-time items, adjusted earnings per share (EPS) of 12 cents missed the Zacks Consensus Estimate of 30 cents.

Net sales fell roughly 1.3% year over year to $2,176.9 million in the quarter. The figure trailed the Zacks Consensus Estimate of $2,252.3 million.

Per the company, wet weather conditions in the Midwest United States affected North American spring fertilizer sales volume and phosphates margin.

Segment Highlights

Net sales in the Phosphates segment were $917 million in the quarter, down around 16.6% year over year due to lower sales volume and sales price stemming from weather- and logistics-related challenges in North America. The segment’s gross margin was at a loss of $12 million. Margin was impacted by higher raw material costs, lower selling prices along with product mix and sales channel shifts toward lower margin international sales.

Potash division’s sales rose nearly 5.3% year over year to $599 million on the back of higher average sales prices, partly offset by lower sales volumes. Gross margin in the quarter was $181 million, up 37.1% year over year.

Net sales in the Mosaic Fertilizantes segment came in at $833 million, up around 16.8% year over year. Gross margin fell to $35 million from $53 million in the year-ago quarter, primarily impacted by idle plant costs and higher costs related to the idling of the Araxa, Catalao and Tapira mining complexes.

Financials

Mosaic ended the quarter with cash and cash equivalents of $401.9 million, down around 61.2% year over year. Long-term debt fell roughly 4.1% year over year to around $4,542.2 million.

Cash flow used by operating activities was $507.3 million in the reported quarter, down 37.1% year over year. Mosaic’s capital expenditures were $294.9 million in the quarter.

Outlook

Mosaic updated its outlook for 2019. It expects that the potential for record North American fertilizer application volumes as well as strong demand in Brazil will drive demand globally during the second half of 2019.

The company now expects adjusted EBITDA for 2019 in the band of $1.8-$2 billion, down from its earlier view of $2-$2.3 billion. It also projects adjusted EPS in the range of $1.10-$1.50 compared with the prior guidance of $1.50-$2.00.

For the third quarter, Mosaic expects phosphates sales volumes in the band of 2.2-2.4 million tons. The segment’s adjusted gross margin is projected in the band of $5-$15 per ton.

Potash sales volumes have been forecast in the range of 2.2-2.4 million tons for the third quarter and adjusted gross margin is projected in the band of $60-$70 per ton.

The company also expects sales volumes in the Mosaic Fertilizantes segment in the band of 3.6-3.8 million tons for the third quarter. It projects gross margin for the segment in the range of $30-$40 per ton.

Price Performance

Shares of Mosaic have lost 25.5% in the past year compared with the industry’s 10.4% decline.

Zacks Rank & Key Picks

Mosaic currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are SSR Mining Inc (NASDAQ:SSRM) , Alamos Gold Inc (TSX:AGI) and Arconic Inc (NYSE:ARNC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 134.8% for 2019. The company’s shares have surged 62.3% in the past year.

Alamos Gold has projected earnings growth rate of 260% for the current year. The company’s shares have gained 46.1% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the current year. Its shares have moved up 11.3% in the past year.

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