It has been about a month since the last earnings report for Mosaic (MOS). Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mosaic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Mosaic's Q1 Earnings Top Estimates, Revenues Lag
Mosaic reported a net income of $45.2 million or 14 cents per share in first-quarter 2024, down from a profit of $434.8 million or $1.28 per share in the year-ago quarter.
Barring one-time items, adjusted earnings per share were 65 cents, beating the Zacks Consensus Estimate of 60 cents.
Net sales declined nearly 26% year over year to roughly $2.68 billion in the quarter. The metric lagged the Zacks Consensus Estimate of $2.83 billion.
Segment Highlights
Net sales in the Potash segment were $643 million in the reported quarter, down around 29% from $907 million in the prior-year quarter. Sales volumes totaled 2.2 million tons, up 16% year over year. The figure is higher than our estimate of 2.1 million tons. The segment’s gross margin declined to $98 per ton from $216 per ton in the year-ago quarter.
The Phosphate division’s net sales were $1.2 billion, down 14% from $1.4 billion in the prior-year period. Sales volume in the segment totaled 1.6 million tons, down from 1.8 million tons last year. The figure trailed our estimate of 1.7 million tons. The gross margin in the quarter was $97 per ton, down from $141 per ton in the year-ago quarter.
Net sales in the Mosaic Fertilizantes segment were $886 million in the quarter, down about 32% year over year. Sales volume in the quarter fell 19% to 1.7 million tons. The figure is lower than our estimate of 2.1 million tons. The gross margin in the quarter was $44 per ton, up from $(1) per ton in the prior-year quarter.
Financials
At the end of the quarter, Mosaic had cash and cash equivalents of $336.7 million, down 27.5% year over year. Long-term debt was $3.22 billion, up 34% year over year.
Net cash used in operating activities was $80 million in the reported quarter.
Outlook
In 2024, agricultural fundamentals are strong, with grains and oilseeds stock-to-use ratios expected to remain under pressure, Mosaic noted. Although corn and soybean prices have softened, farmers worldwide remain profitable. The expected transition from El Nino to La Nina could benefit regions like Southeast Asia, India and Brazil. Many growers in certain parts of the world, after years of reduced fertilizer use, are aiming to restore soil nutrients.
North America's spring planting season is ending, but other regions will ramp up fertilizer demand in the coming months. Despite credit and liquidity issues in Brazil, low inventory and positive demand suggest peak or near-peak fertilizer shipments, per Mosaic. Potash supply constraints are likely to ease with increased exports from Belarus and Russia, while favorable palm oil fundamentals are expected to lead to demand recovery in Southeast Asian markets. Although China has temporarily resumed phosphate exports, domestic needs are expected to take priority, keeping the phosphate market tight in the year. These factors suggest that the global potash market is balanced, with ongoing pressure on phosphate supplies.
The company projects total capital expenditures for 2024 in the band of $1.1-$1.2 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -16.73% due to these changes.
VGM Scores
At this time, Mosaic has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Mosaic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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