Mosaic Rises 5% on Solid Earnings

| About: The Mosaic (MOS)

I've been mentioning Mosaic (NYSE:MOS) in the past week leading up to its earnings report, saying expectations are still way too low based on price increases and fervent demand for its product. Plus it is valued at a major discount to Potash (NYSE:POT). Yesterday they delivered a very nice report, and the stock was up a solid 5% yesterday morning. Beat the bottom line by $0.11, and top line by $230 million... massive.

Mosaic Q1 Profit, Sales Jump

  • Mosaic Co., which makes phosphate and potash crop nutrients, said Tuesday its fiscal first-quarter profit almost tripled amid higher sales, beating expectations as selling prices rose.
  • For the quarter ended Aug. 31, the company earned $305.5 million, or 69 cents per share, up from $109 million, or 25 cents per share, in the same period a year earlier.
  • Revenue rose 56 percent to $2 billion from $1.29 billion.
  • Analysts, on average, were expecting earnings of 58 cents per share on sales of $1.77 billion, according to a poll by Thomson Financial.
  • "Grain markets continue to remain tight and commodity prices remain at very attractive levels, resulting in strong farm economics and demand for crop nutrients," said Jim Prokopanko, president and chief executive, in a statement.
  • Sales in Mosaic's phosphates business rose 50 percent to $1.18 billion and sales in its potash business rose 42 percent $411.8 million.
  • The offshore segment's net sales rose 64 percent to $497.5 million, due mainly to higher sales volumes and selling prices in Brazil, India and Argentina.
  • "Prices for phosphates remain strong and prices for potash have increased, which should result in very strong earnings and cash flow for the remainder of fiscal 2008," Prokopanko said.

Briefing.com is saying:

"Reuters Estimates is telling us that an actual of $0.67, excluding an unrealized mark-to-market derivative losses of $30.1 mln, a tax benefit of $20.4 mln and a loss on extinguishment of debt of $0.5 mln, is comparable to their consensus of $0.62. See 8:12 comment for the full earnings report."

To me, it doesn't matter if they beat by $0.05, $0.07, or $0.11. The revenue growth year over year is on levels of Google and Apple - seriously this growth is akin to a tech company. And it is up only 5%? And still going for less than 20x forward earnings? Gonna have to buy some more to add to my 3.4% position.

I don't see any guidance but be assured analysts are understating 2008. The phosphates growth sort of surprised me, even better than I thought - I thought potash would be driving the business. Looks like they are twin drivers. Mosaic is now up to the 6th largest long position in the fund as I add another 100 shares this AM.

Disclosure: Long Mosaic in fund