On Tuesday, Barclays (LON:BARC) adjusted its stance on Mosaic (NYSE:MOS), shifting from a previously bullish 'Overweight' rating to a more cautious 'Underweight' position. The firm also revised its price target downward from $30.00 to $27.00.
This follows a pattern of cautious analyst sentiment, with InvestingPro data showing three analysts recently revising their earnings expectations downward. The downgrade comes after a period of assessment that showed limited stock price gains from the company's potash segment despite increased tonnage in 2024, with expectations for this trend to persist into 2025. Despite recent challenges, the stock has shown resilience with a 10.41% gain year-to-date.
Barclays notes that while Mosaic is likely to see a low single-digit percentage expansion in potash tonnage for 2025, the pricing is anticipated to rise only in line with inflation. This suggests that trading levels for the potash segment will remain relatively flat, offering minimal upside potential.
In contrast, the phosphate segment is expected to experience a more significant volume increase due to ongoing turnaround efforts and the anticipation of more favorable weather conditions, avoiding the detrimental impact of hurricanes. According to InvestingPro, Mosaic maintains a GOOD overall financial health score and has consistently paid dividends for 15 consecutive years, currently yielding 3.24%.
Despite these positive volume projections for phosphates, Barclays remains cautious. The firm has not fully factored in a complete recovery to Mosaic's targeted annualized phosphate production run rate of 7.8 to 8.2 million tons, though it still predicts a double-digit growth in volume. While recent pricing in phosphates has seen a slight decline, the expectation is that prices will stay elevated for at least the first half of the year due to a lack of relief from suppliers.
Barclays' revision encapsulates the risks associated with a potential delay in purchases, which may shift from the fourth quarter of 2024 to the first quarter of 2025. This delay could impact the company's performance and has been considered in the firm's modeling. The new price target and rating reflect these updated forecasts and the associated risks as analyzed by Barclays.
In other recent news, Mosaic Co has witnessed significant developments. Most notably, the company announced the addition of two new directors, Sonya C. Little and Kathleen M. Shanahan, to its board. This strategic move aims to strengthen its governance and oversight capabilities. Both directors will serve terms that expire at Mosaic's annual shareholder meeting in 2025.
In terms of earnings and revenue, Mosaic disclosed mixed sales volumes and revenues for its fertilizer segments. Potash sales decreased due to strikes affecting Canadian rail and port services, while Mosaic's Fertilizantes segment reported an increase in sales volumes, suggesting improved agricultural market conditions in Brazil.
Analysts have also weighed in on Mosaic's outlook. RBC Capital Markets adjusted the price target for Mosaic, reducing it to $27 citing potential downside risks in phosphate prices. BMO Capital Markets reduced its price target to $44 while maintaining an Outperform rating, indicating that Mosaic's forecasts for 2025 are attainable.
Meanwhile, Piper Sandler maintained its Underweight rating on Mosaic, expressing a cautious stance towards the agricultural economy and anticipating further downside pressure on grain prices.
In line with its commitment to shareholder value, the company declared a quarterly dividend of $0.21 per share. The company's prospects are linked to sustained high phosphate prices and operational enhancements, with anticipated growth in its Biosciences segment and significant cost savings by 2025.
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