Mizuho has adjusted its outlook on Mosaic (NYSE: MOS), a major fertilizer company, reducing its price target to $28 from the previous $31 while maintaining a Neutral rating on the stock.
The revision follows Mosaic's announcement that its third-quarter potash volume is expected to be between 1.85 and 2.05 million tons, a decrease from the initial guidance of 2.1 to 2.3 million tons.
This reduction is attributed to operational challenges at the Colonsay and Esterhazy mines. Despite the volume decrease, the company's expected realized potash price remains steady at $200 to $220 per ton.
Mosaic also revised its phosphate volume forecast downward to 1.45 to 1.65 million tons from the initial estimate of 1.7 to 1.9 million tons, citing production disruptions caused by recent hurricanes.
The anticipated price for DAP (diammonium phosphate) at the plant remains unchanged at $555 to $575 per ton. As a result of the lowered sales volume projections, the firm now anticipates Mosaic to report third-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) and EPS (earnings per share) of $513 million and $0.47, respectively, compared to previous expectations of $604 million and $0.66, and the current Bloomberg consensus of $568 million and $0.62.
The revised estimates also include a reduction in the 2024 EBITDA forecast to $2.23 billion from $2.36 billion, approximately a 5% decrease, and a cut in EPS projections to $2.24 from $2.65, a roughly 14% decrease due to lower EBITDA and below-the-line items, compared with the Bloomberg consensus of $2.31 billion and $2.53.
On the financial front, Mosaic reported a decrease in its second quarter adjusted earnings per share (EPS) from $1.04 last year to $0.54 this year, with an adjusted EBITDA of $584 million on revenues of $2.8 billion. Scotiabank maintained its Sector Outperform rating for Mosaic, emphasizing that these issues do not alter their investment thesis.
In the midst of these developments, Mosaic's Senior Vice President - Digital Strategy, Corrine D. Ricard, will transition to a Senior Advisor role in anticipation of her planned retirement at the end of the year. .
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Mosaic's financial situation, providing context to Mizuho's revised outlook. The company's market capitalization stands at $8.22 billion, with a P/E ratio of 34.22, indicating that investors are still pricing in growth expectations despite the recent operational challenges.
InvestingPro Tips highlight that Mosaic has maintained dividend payments for 14 consecutive years and has raised its dividend for 5 consecutive years, demonstrating a commitment to shareholder returns even in challenging times. This could be seen as a positive sign for long-term investors, despite the current operational setbacks.
The company's revenue for the last twelve months as of Q2 2024 was $12.19 billion, with a revenue growth decline of 27.54% over the same period. This aligns with Mizuho's concerns about reduced sales volumes and potential market challenges.
Interestingly, Mosaic is trading near its 52-week low, with a dividend yield of 3.25%. This could present an opportunity for value investors, especially considering that analysts predict the company will remain profitable this year.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing Mosaic's future prospects.
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