Mosaic Earnings Thursday - Why It's A Buy

| About: The Mosaic (MOS)

On Thursday, Mosaic Company (NYSE:MOS) releases its 3rd quarter FY 2013 earnings results. Mosaic is one of the world's largest producer of phosphate, which it uses to produce phosphate fertilizers. As the world's population grows, it is going to be increasingly more important to produce more from the same amount of land and fertilizing companies like Mosaic are a perfect way to profit from this agricultural trend.

Shares for Mosaic Company are up 5.87% YTD and trade near their 52 week highs at $59.32. Analysts are forecasting an earnings per share of $0.88 for the third quarter, and have a mean price target of $84.46 per share.

Positives for Mosaic

  • Yesterday, Analysts at TheStreet Ratings reiterated their buy Recommendation citing Mosaic's low debt-equity ratio of 0.08 and quick ratio of 2.67.
  • On March 19th, Mosaic announced a joint venture to develop a phosphate production facility in Saudi Arabia. The deal gives Mosaic 25% of a facility that is projected to produce 3.5 million tonnes of finished product per year.
  • Cashflows from Operations have risen in each of the three previous years and Mosaic has used $1.14 billion from them to repurchase shares in 2012.
  • Currently, Mosaic trades with P/E of 13.9 which is lower than the industry averages 15.0. Competitors Agrium Inc. (NYSE:AGU) and Potash Corp. (NYSE:POT) both currently trade with P/E ratios of 10.38 and 16.6 respectfully.
  • While Mosaic continues to deal with pressure on margins due to increased competition and supply of finished product, Mosaic has more than enough cash and assets to leverage more deals like the one in Saudi Arabia. Continuing to vertically integrate, diversify revenue streams and lower production costs is increasingly important for companies in this space.

Other ways to Play Mosaic

In addition to buying shares directly, a more diversified approach can be found buy buying either of the following two ETFs, both of which list MOS as one of their top 10 individual holdings:

  • Market Vectors - Agribusiness ETF (NYSEARCA:MOO)
  • Fertilizers/Potash ETF (NYSEARCA:SOIL)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.