Mosaic Is Ready To Make A Move

| About: The Mosaic (MOS)

I have not written about Mosaic (NYSE:MOS) since December when it was trading at just under $55 a share. The shares have moved up some 8% since then but things are starting to turn up for this major fertilizer maker. Since I covered its competitor Potash (NYSE:POT) yesterday, it seems appropriate to provide an update on Mosaic as it is impacted by some of the same dynamics:

Recent positives for MOS:

  • The company recently reported third quarter profit that rose 26% Y/Y on higher and potash sales (up 37% Y/Y).
  • The 37% rise in potash sales confirms BMO Capital Markets' thesis that potash is the sweet spot for fertilizer manufacturers and why it is bullish on Mosaic and Potash.
  • TheStreet reiterated its "Buy" rating on the stock last week (Price Target:$69)
  • Deutsche Bank just raised its price target to $64 from $62 as it expects stock buybacks to pick up in 2014 by more than $1.4B over its previous estimate.

The Mosaic Company produces and markets concentrated phosphate and potash crop nutrients for the agriculture industry worldwide.

4 additional reasons MOS still has upside from $59 a share:

  1. The stock sells at just over 13x trailing earnings, a significant discount to its five year average (19.3).
  2. The 12 analysts that cover the stock have a median price target of $85 a share on MOS, substantially above its current stock price.
  3. The company has a solid balance sheet with over $2B in net cash on the books and the stock sells for less than 11x forward earnings.
  4. MOS sells near the bottom of its five year valuation range based on P/S, P/CF and P/B. The shares also yield 1.7%.

Disclosure: I am long MOS, POT. 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.