Mosaic (MOS) to Post Q2 Earnings: What's in the Cards?

The Mosaic CompanyMOS is set to release second-quarter 2018 results after the market closes on Aug 6.

The fertilizer maker swung to a profit in the first quarter, aided by higher realized prices for nutrients and improved market conditions. The company logged a profit of $42 million or 11 cents per share, against a loss of $1 million or break-even per share recorded a year ago.

Adjusted earnings of 20 cents per share for the first quarter, however, trailed the Zacks Consensus Estimate of 24 cents. Adjusted earnings were affected by a delayed spring season and weather-related issues that hurt sales volumes for phosphate and potash in the quarter.

The company's revenues rose roughly 22% year over year to $1,933.7 million in the quarter, driven by the Vale Fertilizantes acquisition. It beat the Zacks Consensus Estimate of $1,877 million.

Mosaic beat earnings estimates in three of the trailing four quarters while missed once, delivering an average beat of 24.3%.

Mosaic has outperformed the industry over the past six months. The company's shares have gained around 19.2% over this period compared with roughly 14.4% rise recorded by the industry. Strong earnings outlook, healthy demand trends for nutrients, higher fertilizer prices and buoyant prospects from the Vale Fertilizantes acquisition are contributing to the rally in Mosaic's shares.

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

Factors to Consider

Mosaic, in May, bumped up its adjusted earnings per share guidance for 2018 factoring in improved market conditions. For the year, the company now sees adjusted earnings to be in the range of $1.20-$1.60 per share, up from its prior view of $1.00-$1.50.

Moreover, the company expects phosphates sales volumes in the band of 2.1 million to 2.4 million tons for the second quarter of 2018. The segment's adjusted gross margin is expected to be in the band of $65 to $75 per ton. Potash sales volumes have been projected in the range of 2.1-2.4 million tons for the second quarter and the adjusted gross margin is anticipated to be in the band of $50 to $60 per ton.

The Zacks Consensus Estimate for revenues for Mosaic for the to-be-reported quarter stands at $2,348 million, reflecting an expected increase of 33.8% from the year-ago quarter.

The Zacks Consensus Estimate for net sales for the Phosphate segment is pegged at $1,028 million for the second quarter, reflecting an estimated 5.4% rise from the year ago quarter. Potash segment's net sales are expected to rise 16.5% year over year in the second quarter as the Zacks Consensus Estimate is pegged at $545 million. Net sales for Mosaic's International Distribution segment is projected to witness an increase of 56% from the prior year quarter as the Zacks Consensus Estimate for the second quarter is pegged at $910 million.

Moreover, the Zacks Consensus Estimate for sales volumes for the Phosphate segment stands at 2.56 million tons, reflecting a 31.6% increase on a sequential comparison basis. The same for the Potash segment is pegged at 2.25 million tons, representing a sequential increase of 33.3%.

Mosaic is strongly positioned to leverage the rising global demand for fertilizers. The company sees improving market conditions and 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 nutrients. Mosaic also gained from higher realized prices for phosphate and potash in the first quarter, which is likely to continue in the June quarter.

The Vale Fertilizantes acquisition will also likely drive revenues in the to-be-reported quarter. The acquisition has allowed the company to capitalize on the rapidly growing Brazilian agricultural market. Mosaic should also benefit from its cost reduction actions.

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 -3.19%. This is because the Most Accurate estimate is 38 cents while the Zacks Consensus Estimate is pegged at 39 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 #2, which when combined with a negative ESP, makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Rayonier Advanced Materials Inc. RYAM has an Earnings ESP of +8.74% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Orion Engineered Carbons, S.A. OEC has an Earnings ESP of +3.85% and sports a Zacks Rank #2.

The Chemours Company CC has an Earnings ESP of +2.38% and carries a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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