Mosaic Stock: Rising Prices Turbo-Charge Top U.S. Fertilizer Producer’s Earnings
Andy Hecht | Jun 14, 2022 19:39
This post was written exclusively for Investing.com
- War in Ukraine, sanctions creating worldwide fertilizer shortage
- World's top fertilizer companies
- Mosaic: Leading fertilizer producer
- A bullish earnings trend
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Each year, as the global population grows by around 80 million people, the world increasingly depends on escalating crop sizes. Fertilizers are a critical farming input for that. They have a direct impact on the ability to grow more while augmenting planting efficiencies.
Many farmers use fertilizers on a daily basis to boost crop yields since they enhance the soil’s water retention capacity and increase its fertility.
Fertilizers can be sourced naturally or come from synthetic production. In either form they supply nutrients to plants and soil requiring nitrogen, potassium and phosphorous.
The Mosaic Company (NYSE:MOS) is a leading fertilizer producer, distributing product to North American and global customers.
h2 World’s Leading Fertilizer Exporting Countries/h2In 2021 the world’s top fertilizer exporters were:
Source:
As the chart shows, Russia and China controlled 28.4% of the fertilizer exports in 2021.
h2 War In Ukraine And Sanctions Create Worldwide Shortage/h2The war in Ukraine and Russian export bans to “unfriendly” countries supporting Ukraine have caused prices, including for fertilizers, to soar; the conflict has also created availability issues. China’s “no-limits” cooperation with Russia and tensions with the U.S. and Europe further limit fertilizer supplies and put additional upward pressure on prices in 2022 and beyond.
h2 World’s Top Fertilizer Producing Companies/h2As of June 13, the leading global fertilizer companies by market cap were:
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Source:
Mosaic, number-three globally as well as the top U.S. producer, had an 11.4% share of the publicly traded fertilizer market by market cap.
h2 Mosaic: Leading Fertilizer Producer/h2Mosaic is headquartered in Tampa, Florida, but is a multi-national business. A summary of MOS’s businesses includes:
Source: Barchart
At around $51 per share on June 13, MOS had a market cap of more than $19.3 billion. An average of 8.02 million shares change hands each day. MOS pays shareholders a $0.60 dividend, which translates to a 1.18% yield on the stock.
In March 2020, as the global pandemic gripped markets across all asset classes, MOS shares fell to a $6.50 low.
Source: Barchart
The chart highlights that the trend was already higher before 2022, with the stock closing at $39.29 on Dec. 31, 2021. At the end of last year MOS shares had moved over six times higher from the March 2020 low.
When Russia invaded Ukraine in February, MOS products took on new strategic importance worldwide. In April, the stock traded to a high of $79.28, 12.2 times the price at the March 2020 lows, and more than double the level at the end of 2021. MOS has pulled back to the $51 level on June 13, but its position in the fertilizer market remains critical given the lack of fertilizers flowing from Russia.
h2 Bullish Earnings Trend/h2MOS earnings have been steadily rising over the past four quarters.
Source: Yahoo Finance
MOS EPS has risen steadily. After earning $2.41 per share in Q1 2022, the current expectations are for EPS of $4.12 in Q2, a high-demand fertilizer period where prices for MOS products have soared.
Source: Yahoo Finance
The company’s quarterly revenue and earnings charts show explosive growth.
A survey of 19 analysts on Investing.com has an average price target of $74.73 for MOS shares, with a range of $59 to $95.
Source: Investing.com
At the $51 level, the target is more than 45% above the current price. Moreover, MOS at $51 is below the low end of analysts’ forecasts, making the stock inexpensive in the current environment.
While the stock market has moved lower in 2022, MOS has bucked the trend. The war in Ukraine, sanctions on Russia and Russian retaliation are bullish for the fertilizer company.
Feeding the world depends on access to fertilizers, and MOS is perfectly positioned to fill some of the void left by Russian export bans. Rising global fertilizer prices will likely continue to turbo-charge earnings for the U.S. producer.
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