Why Is Mosaic (MOS) Down 55.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Mosaic (MOS). Shares have lost about 55.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mosaic due for a breakout? 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 Q4 Earnings Miss on Hefty Charges, Sales Beat

Mosaic slipped to a loss of $921 million or $2.43 per share in fourth-quarter 2019 from a profit of $112.3 million or 29 cents in the year-ago quarter.

The bottom line in the reported quarter was hit by $1.1 billion in non-cash charges. The company took a pre-tax charge of $530 million related to the idling of the Colonsay potash mine in Saskatchewan, Canada. It also a recorded a charge of $589 million associated with goodwill impairment in the Phosphates segment in the quarter.

Barring one-time items, adjusted loss per share was 29 cents, much wider than the Zacks Consensus Estimate of a loss of a penny.

Net sales fell roughly 18% year over year to $2,076.3 million in the quarter, hurt by reduced sales volumes and phosphate prices. The figure, however, beat the Zacks Consensus Estimate of $1,941.5 million. The company saw continued weakness in key global fertilizer markets in the quarter.

Segment Highlights

Net sales in the Phosphates segment were $698 million in the quarter, down around 25% year over year due to lower sales prices that more than offset modestly higher volumes. The segment’s gross margin per ton was at a loss of $52. Margin was partly impacted by lower realized prices.

Potash division’s sales dropped roughly 33% year over year to $395 million as lower sales volumes more than offset higher prices. Gross margin per ton in the quarter was $61, down around 31% year over year, due to higher costs per ton resulting from reduced operating rate.

Net sales in the Mosaic Fertilizantes segment came in at $864 million, down around 11% year over year, hurt by lower prices. Gross margin per ton fell to $32 from $56 in the year-ago quarter as lower prices more than offset synergies.

Full-Year Results

Net loss for 2019 was $2.78 per share, compared with earnings of $1.22 per share a year ago. The results were hurt by charges associated with asset portfolio optimization and goodwill impairment in the Phosphates segment.

Net sales were $8,906.3 million for the full year, down around 7% year over year.

Financials

Mosaic ended 2019 with cash and cash equivalents of $519.1 million, down around 39% year over year. Long-term debt was essentially flat year over year at around $4,525.5 million.

Cash flow provided by operating activities was $277.6 million in the reported quarter, up 85% year over year. The same for 2019 was $1.1 billion, down 22% year over year. Mosaic’s capital expenditures were $341.1 million in the fourth quarter and $1.3 billion for 2019.

Mosaic also bought back 7.1 million shares for $150 million and paid dividends worth $67 million in 2019.

Outlook

Moving ahead, Mosaic sees strong global demand for fertilizers in 2020 based on solid worldwide demand for grains and oilseeds and strong farm economics.

The company expects China to be a major factor for phosphate market fundamentals this year in the wake of the coronavirus outbreak. Per Mosaic, much of the phosphate production in Hubei province has been idled or curtailed due to coronavirus. The company envisions this decline in supply coupled with limited new capacity in other parts of the world to contribute to a sustained tightening of phosphate market fundamentals.

The company also noted that production curtailments that started in second-half 2019 are bringing the potash market into balance this year. It sees strong demand in the Northern Hemisphere for spring. Mosaic also expects a typical surge in activity in the Southern (NYSE:SO) Hemisphere in the third quarter of 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -566.67% due to these changes.

VGM Scores

At this time, Mosaic has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.