RIM, Mosaic Earnings Should Provide Upside Surprise

This week more than 200 companies are scheduled to release their earnings. We have screened all of them looking for those that have the characteristics of a likely earnings surprise.

We have identified two companies that we believe will surprise to the upside and a few trades that might deliver a big bang for your aggressive dollars.

Research in Motion (RIMM):

Research in Motion is set to release earnings after the close of trading on Wednesday, April 2^nd. According to Yahoo, RIMM is expected to post a profit of 0.70 cents per share for their 4^th quarter.

Recently Research increased its subscriber forecast for their fourth quarter. The company said net subscriber will be 15% to 20% higher than it originally forecast. As a result, we expect RIMM to announce earnings that will beat investors’ and analysts’ expectations.

RIMM does have a history or rallying aggressively in the days immediately following its earnings announcements. A 10%+ move in few days is not uncommon. A 10% upswing puts RIMM at about $126 per share.

Super aggressive investors might want to consider the April 120 or 125 calls. If RIMM trades at our projected $126 per share, the April 120 call would be worth approximately $13.5 per contract, up from Friday’s close of $8.10 or a 67% gain. The 125 calls would be valued near $10.11 per contract for a 76% gain from the week end close of $5.75.

Mosaic Company (MOS):

Mosaic Company is another high flyer. MOS will have its conference call on Friday, April 4^th at 10 am eastern time. Consensus estimates for Mosaic have grown steady for the quarter, starting out at .86 cents and standing at .95 cents today.

We expect MOS to report earnings above Wall Street’s expectations.

One of MOS’s competitors, Monsanto (MON) should give us a sneak peek as to what to expect from MOS. Monsanto will release their earnings before the market opens on Wednesday. Investors should keep a close eye on Monsanto, as both MOS and MON are benefiting from the same metrics; the rise in fertilizer and commodity prices.

If Monsanto knocks the ball out of the park, expect Mosaic to do the same.

Again, aggressive traders might want to look at the April 105 or 110 calls. With a positive earnings surprise and some upward guidance from management, we feel $120 is not out of the question. At $120 by April 7^th, the 105s offer up 120% gains and the 110 calls 142% based on Friday’s closing prices of $7.70 and $5.40 respectively.

Disclosures: none for both

Comments

[Vikram Saxena:]

MON is not a MOS competitor. MOS delivers fertilizers and nutrients. MON delivers seeds and pesticides. They have very little overlap apart from being Ag plays.

If you looked at the crop reports which came out yesterday, corn went down and soyabean went up. Guess what, soyabean crops require less fertilizers than corn since they replinish the soil (crop rotation).

MOS' chart shows a descending channel with lower highs, and highs made on lower volume. It is primed for a sell off, especially when the rest of the equity market looks up.

2008 Apr 01 05:17 AM

[sliman:]

World demand is more important than small change in corn acreage in U.S. Its a buy.

2008 Apr 01 05:21 AM

[mcover:]

Vikram is absolutely right. What is also largely forgotten is that natural gas is the critical input for nitrogen fertilizer. Natty prices have risen sharply over recent months and the average analyst is using $7.25 gas prices in their models vs the $10 strip. Nitrogen fert margins are HIGHLY sensitive to nat gas prices. each 50 cent change in nat gas price impacts MOS eps by about 30-35 centes per share. The key point here is that while MOS will likely blowout this Q and pricing IS firm - models HAVE NOT been adjusted for higher input costs. Further multiples in this group are off the charts on peak earnings. Overlay that with a likely unwinding of the Q1 commodity trade and I think you have the udnerpinnings of a wonderful short opportunity.

2008 Apr 01 09:18 AM

[Warm_Paw:]

If all is so good with RIMM, why is share price falling?
Insiders know the truth.
Are they going to miss on their numbers or is there a legal issue about to rear it's ugly head?
Or are short sellers manipulating the stock?
Whatever the reason, with all of the good news and such a bullish day, the stock is going in the wrong direction.

The rats are abandoning the ship!

2008 Apr 01 10:17 AM

[saianjuma1:]

How is MOS down 6% today?!!

2008 Apr 01 10:24 AM

[cdsullivan21:]

Did you see the pricing increases that Canpotex (think the Canadian potash version of OPEC) negotiated with India last week? A 37% increase in contracted volume with a 131% increase in price. Do the math, that more than triples the top line for shipments to India alone. I expect the industry's pricing power will remain strong as other contracts are announced.

metric tonnes $ / tonne Revenue
950,000 $270 $256,500,000
1,300,000 $625 $812,500,000

While it's true that corn requires more fertilizer than soybeans, the recent U.S. crops report is not the "final word" on what actually gets put in the ground. Also, don't be fooled into thinking that a potentially modest decrease in the U.S. corn crop will have any significant impact on worldwide demand for fertilizers. The growth story for MOS is not dead. I am increasing my position every time there's a sell-off, fueled by misguided buying of the financials. Stay long for 2008.

2008 Apr 01 12:44 PM

[Thomas888:]

Let US remember the Agriculutre and Fertilizer business is businesses that are about food for Humans and for animals and Fuel and Chemical etc, not just in the U.S. but Globally. They are a international play on the Demand for there products that are needed and that the supply isnt that much. Concrening MON and MOS,I hear good things about them, I own both and also POT.and expect there businesses to keep on doing good for the short and long term.Visit there web sites and read all about there company instaed of just looking at there stock. They are good quality companies highly rated. So why sell them why not just hold them and dollar cost average over the long term and buy even more on any dips. It seems that the day traders are playing these stocks do to there recent voilatility. Buying on dips and rideing them up and when rallys stall out they sell them and wait to buy back at low of dip.Its plian to see they are tradeable if thats what one want to do.But I look at them as a long term holding in companies with a bright future and future good earnings reports to continue. There is always someone who will be bearish on them for some reason. Look also at the DBA sure its had a big run up but corn,soybeans,sugar,wh... still has a big demand and should continue to trend up its just had a pull back do to some pulling there money out and putting it somewhere else not because they think the DBA wont continue in a long term uptrend.We all got to eat here in the U.S. and Globally. So food is in great demand. Thomas

2008 Apr 01 01:13 PM

[Thomas888:]

Here is some soild info on MOSIAC from Zack Research:, I heard an analyst form some where ,warned Mosiac was going to miss there earning estimates to be reported on friday,but thats not what Zacks Expects.Zacks #1 Rank Top Performers: First Solar, Walter Industries, Trina Solar, Pioneer Drilling and Mosaic
3:06 PM EDT April 1, 2008
CHICAGO--(BUSINESS WIRE)--

Zacks.com announces the latest list of top performing Zacks #1 Rank ("strong buy") stocks. The stocks on the prestigious list with the

highest returns last week were First Solar, Inc. (NASDAQ: FSLR), Walter Industries, Inc. (NYSE: WLT), Trina Solar Ltd. (NYSE: TSL),

Pioneer Drilling Company, Inc. (AMEX: PDC) and The Mosaic Company (NYSE: MOS). Each of these stocks easily outperformed the S&P 500.

Stocks ranked #1 (Strong Buy) by Zacks have produced an average annual return of +32% since inception in 1988. During the 2000-2002 bear

market, Zacks #1 Rank stocks gained 43.8% while the S&P 500 tumbled 37.6%. To learn more about the Zacks Rank, go to

at.zacks.com/?id=3172.... Mosaic Company (NYSE: MOS) is scheduled to report its fiscal third-quarter results on Friday. The fertilizer company has reported

three straight quarters of better-than-expected earnings per share with an average surprise of a little over 9%. MOS has benefitted from

a solid agricultural market that has enjoyed rising prices for its goods. The company moved into its reporting week with a gain of almost

14.6% for the five-day period ended Mar 28, which was enough to place it on the Zacks #1 Rank top performers list. MOS is no stranger to

this group, having made the top performers list for the month of February.

Earnings estimates for the year ending May 2008 have been trending higher for a while now, rising 6.9% in the past two months and 4.3% in

the past 30 days. In January, MOS announced fiscal second-quarter earnings per share that topped the consensus by almost 11%, while

improved year-over-year by more than 400%. Net sales moved higher by 44% to $2.2 billion. Its Phosphates segment grew 61% year over year

while its Potash segment advanced 23%.

Thomas

2008 Apr 01 05:26 PM

[bryanz:]

Why is the share price falling on RIMM? If memory serves me correctly the stock is up from the recent lows in the mid-80s. And if you're going to tell me that it's still off it's 52 week high, well then I'd dare you to pick 10 stocks randomly and show me 9 that aren't off their 52 week high.

2008 Apr 01 10:00 PM

[Urbane Gori...:]

Profit taking to cover losses..

2008 Apr 02 11:30 PM