Mosaic (MOS) Misses Earnings Estimates in Q3, Cuts FY19 View

The Mosaic Company MOS slipped to a net loss of $44.1 million or 11 cents per share in third-quarter 2019 from a profit of $247.5 million or 64 cents in the year-ago quarter.

Barring one-time items, adjusted earnings per share were 8 cents, falling well short of the Zacks Consensus Estimate of 27 cents.

Mosaic faced challenging market conditions in the third quarter. The company noted that its results were hurt by weaker-than-expected gross margins in its Phosphates segment.

Net sales fell roughly 6% year over year to $2,753.4 million in the quarter. The figure, however, beat the Zacks Consensus Estimate of $2,575.8 million.

The Mosaic Company Price, Consensus and EPS Surprise

 

The Mosaic Company Price, Consensus and EPS Surprise

The Mosaic Company price-consensus-eps-surprise-chart | The Mosaic Company Quote

Segment Highlights

Net sales in the Phosphates segment were $820 million in the quarter, down around 18% year over year mainly due to lower sales prices stemming from weather-related decline in demand in North America. The segment’s gross margin per ton was at a loss of $10 million. Margin was impacted by lower selling prices that more than offset benefits of lower raw material costs.

Potash division’s sales rose roughly 1% year over year to $616 million on the back of higher average sales prices, partly offset by lower sales volumes. Gross margin per ton in the quarter was $68 million, up 3% year over year.  

Net sales in the Mosaic Fertilizantes segment came in at $1.4 billion, flat year over year. Gross margin per ton fell to $39 million from $42 million in the year-ago quarter.

Financials

Mosaic ended the quarter with cash and cash equivalents of $641.1 million, down around 38% year over year. Long-term debt was essentially flat year over year at around $4,533.2 million.

Cash flow provided by operating activities was $486 million in the reported quarter, down 7% year over year. Mosaic’s capital expenditures were $322.3 million in the quarter.

Mosaic has also bought back 7.1 million shares for $150 million year to date. It repurchased 5.8 million shares for $125 million in the reported quarter.
 
Outlook

Mosaic lowered its outlook for 2019. The company now expects adjusted EBITDA for 2019 in the band of $1.4-$1.5 billion, down from its earlier view of $1.8-$2 billion. It also projects adjusted earnings in the range of 50-60 cents per share, down from its prior guidance of $1.10-$1.50.

While the company sees a strong North American 2019 fall application season, it believes that this may not lead to strong near-term revenue recognition given distributors’ high inventories.

For the fourth quarter, Mosaic expects phosphates sales volumes in the band of 2.1-2.3 million tons. Potash sales volumes have been forecast in the range of 1.7-1.9 million tons for the quarter. The company also expects sales volumes in the Mosaic Fertilizantes segment in the band of 2.2-2.4 million tons for the fourth quarter.

Mosaic is also temporarily lowering production in phosphates and potash to match demand in 2019. The company envisions that these actions will place it to capitalize on opportunities in 2020.

Price Performance

Shares of Mosaic have lost 26.9% year to date, compared with the industry’s 4.5% decline.

Zacks Rank & Key Picks

Mosaic currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited AEM, Kinross Gold Corporation KGC and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 168.6% for the current year. The company’s shares have rallied 66% in a year’s time.

Kinross has projected earnings growth rate of 210% for the current year. The company’s shares have surged around 77% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 39.3% for the current year. The company’s shares have gained roughly 48% in a year’s time.

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