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Mosaic's (MOS) Earnings and Revenues Top Estimates in Q3

The Mosaic Company MOS reported net income of $227.5 million or 65 cents per share in the third quarter of 2017 as against a profit of $39.2 million or 11 cents recorded a year ago.

Earnings, barring a 22 cents positive impact from notable items, were 43 cents per share that beat the Zacks Consensus Estimate of 25 cents. The company gained from strong operational performance, healthy demand for its products and better price realization in the quarter.

The company’s revenues rose roughly 1.7% year over year to $1,984.8 million in the quarter. The figure also topped the Zacks Consensus Estimate of $1,961 million. Lower phosphate sales volumes were offset by higher international distribution volumes and increased realized potash prices.
 

Mosaic Company (The) Price, Consensus and EPS Surprise

 

 

Segment Highlights

Revenues from Mosaic’s Phosphates segment declined 16.2% year over year to $779 million in the third quarter of 2017 due to lower sales volumes mainly as a result of Hurricane Irma. The segment’s gross margin declined to $67 million from $101 million a year ago, owing to $26 million of higher costs due to Irma.

Potash division’s sales rose around 10.7% year over year to $474 million in the quarter, driven by higher realized prices. Gross margin in the quarter was $99 million compared with $40 million reported a year ago. The improvement was mainly driven by higher realized product prices, improved operating rates and reduced plant spending.  

Revenues from the International Distribution segment went up around 9.7% year over year to $931 million owing to higher sales volumes, partly offset by reduced average selling prices. Gross margin was $64 million, compared with $71 million reported a year ago.

Financials

Mosaic’s cash and cash equivalents amounted to $685.7 million as of Sep 30, 2017, up around 4.9% year over year.

Long-term debt rose to $3,722.3 million as of Sep 30, 2017, from $3,450.3 million as of Sep 30, 2016.

Mosaic’s capital expenditures were $198 million in the reported quarter.

Operating cash flow was $136 million in the quarter, up 54.5% from $88 million in the year-ago quarter.

Outlook

Mosaic expects phosphates sales volumes in the band of 2.3-2.6 million tons for the fourth quarter of 2017 compared with 2.5 million tons for the same quarter in 2016. Average selling price, FOB plant, is expected to be in the range of $320-$350 per ton. The segment gross margin rate is expected to be in the upper single digits including an expected $9 million carry-over impact from Hurricane Irma.

Potash sales volumes have been forecast in the range of 1.9-2.2 million tons for the fourth quarter, compared with 2 million tons in the prior-year quarter. Average selling price, FOB plant, is expected in the band of $175-$195 per ton and the gross margin rate is anticipated to be in the upper teens reflecting an unfavorable impact of production mix and scheduled turnarounds during the quarter.

Total sales volumes for the International Distribution segment are expected to range from 1.5-1.8 million tons for the fourth quarter of 2017, compared with 1.9 million tons in the prior-year quarter. The segment gross margin is estimated to be around $20 per ton.

Price Performance

Mosaic’s shares have lost 8.9% in the past three months underperforming the industry’s gain of 13.6%.

 


Zacks Rank & Key Picks

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

Some better-ranked stocks in the basic materials space are Cabot Corporation CBT, BHP Billiton Limited BHP and Air Products and Chemicals Inc. APD.

Cabot has expected long-term earnings growth of 10.7% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP Billiton has expected long-term earnings growth of 5.3% and flaunts a Zacks Rank #1.

Air Products has expected long-term earnings growth of 12.1% and carries a Zacks Rank #2 (Buy).

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