It has been about a month since the last earnings report for Mosaic (MOS). Shares have added about 7.3% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Mosaic’s Earnings Miss, Sales Surpass Estimates in Q1
Mosaic slipped to a loss of $203 million or 54 cents per share in first-quarter 2020 from a profit of $130.8 million or 34 cents in the year-ago quarter. The bottom line in the reported quarter was affected by $295 million in non-cash foreign currency losses.
Barring one-time items, adjusted loss per share was 6 cents, wider than the Zacks Consensus Estimate of a loss of 5 cents.
Net sales fell 5.3% year over year to $1,798.1 million in the quarter, hurt by reduced sales prices. The figure, however, beat the Zacks Consensus Estimate of $1,641.3 million.
Segment Highlights
Net sales in the Phosphates segment were $619 million in the quarter, down 23.2% year over year due to lower sales prices. The segment’s gross margin slipped to a loss of $83 from profit of $55 million in the year-ago quarter as lower prices and the cost impacts of reduced operating rate were partly offset by improved raw material costs.
Potash division’s sales dropped 12.3% year over year to $442 million mainly due to lower prices. Gross margin in the quarter was $109 million, down 41% year over year, as lower prices more than offset lower costs.
Net sales in the Mosaic Fertilizantes segment were $731 million, up 4.7% year over year, despite a weaker pricing environment. Gross margin increased to $66 million from $52 million in the year-ago quarter due to enhanced volumes and margins in the distribution business as well as substantial currency tailwind.
Financials
Mosaic ended the quarter with cash and cash equivalents of $1,069.2 million, up 178% year over year. Long-term debt was essentially flat year over year at $4,525.2 million.
Net cash provided by operating activities was $189.9 million in the reported quarter. The company’s capital expenditure was $263.5 million in the first quarter.
Outlook
Mosaic expects depreciation, depletion and amortization of $910-$920 million for 2020. Moreover, it anticipates net interest expenses of $180-$190 million for 2020.
Also, the company anticipates capital expenditure of roughly $1.2 billion for 2020.
Mosaic also expects to receive cash proceeds of up to $170 million from tax refunds and unwinding of an interest rate swap in 2020. The company also noted that it expects to achieve $50 million in Mosaic Fertilizantes’ transformational savings for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -1800% due to these changes.
VGM Scores
Currently, Mosaic has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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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