The mosaic society'S (MOS – Free Report) looks attractive at the moment because of its strong fundamentals and optimistic earnings prospects. The fertilizer giant is well positioned to take advantage of the favorable demand dynamics and crop nutrient prices and Vale Fertilizantes acquisition.
Mosaic currently owns a Zacks Rank # 2 (Purchase) and a VGM score of A. Our research shows that stocks with a VGM A or B score associated with a Zacks Rank # 1 (Strong Buy) or 2 offer the best opportunities in the market. Investment for investors.
The trend in revisions to earnings estimates also points to strong earnings prospects for Mosaic.
Let's take a closer look at the factors that make Mosaic stock an attractive investment option at the moment.
Mosaic has outperformed the sector it has been in for more than a year. Its shares jumped 20.8%, compared with a decline of about 1.9% recorded by the industry. The strong earnings outlook and optimistic outlook for the acquisition of Vale Fertilizantes contributed to the recovery of the stock.
Prospects impressive results
During its third quarter call for 2018, Mosaic increased its adjusted earnings per share guidance for 2018 from $ 1.80 to $ 2.00 from the prior outlook of $ 1.45 to $ 1.80, reflecting good commercial performance and the decline in the effective tax rate expected for the year. The company also expects an adjusted EBITDA for 2018 of between $ 1.90 and $ 2 billion, up from the previous forecast, which was between $ 1.80 and $ 1.95 billion.
Zacks' consensus estimate of Mosaic's earnings for 2018 is currently set at US $ 1.92, reflecting an expected growth of 76.2% from one year to the next. In addition, the same for the fourth quarter amounted to 56 cents, which indicates a year-over-year growth of 64.7%. Profits are also expected to grow by 24% in 2019.
Revisions to earnings estimates have the greatest impact on stock prices. Estimates for 2018 for Mosaic have increased over the last three months. During this period, the consensus estimate Zacks for 2018 has increased about 10.3%. The same thing for the fourth quarter also increased by 12%. In addition, estimates for 2019 increased by 7.7% over the same period.
Improve the fundamentals of the industry
Mosaic is well positioned to take advantage of demand and favorable prices for fertilizers. It takes advantage of the improved fundamentals of the phosphate and potash market. The company expects continued growth in global demand for phosphates and anticipates record deliveries in 2019.
Prices of major nutrients from crops also increased due to strong global demand and tightening of supply. Mosaic predicts that growth in global phosphate demand will outpace supply in 2019, providing price support as well as margins. The decline in Chinese exports and the slower than expected ramp-up of new facilities have contributed to a reduction in the supply of phosphates. Tighter market conditions also pushed up potash prices.
Vale Fertilizantes Synergy Capture
The acquisition of Vale Fertilizantes allowed Mosaic to take advantage of Brazil's growing agricultural market. The buyback is expected to generate an annualized cash flow improvement of $ 275 million by the end of 2020, while providing significant leverage on improving the nutrient cycle of crops. Mosaic expects to achieve synergies of $ 140 million to $ 160 million for the year 2018.
K3 will offer cash benefits
Mosaic is making significant progress with its Esterhazy K3 potash expansion project. The company achieved a significant production milestone on the project late 2018. The company commissioned the production winch and also delivered the first bucket of potash to the production plant of Esterhazy K2.
Mosaic expects the Esterhazy operation to be the largest and most competitive underground potash mine in the world after the completion of K3. He also believes that the Esterhazy K3 project is the only new potash mine in the world that meets the planned budget and schedule. The company expects the project to reach full operational capability by 2024.
In particular, the project should generate a higher return on investment than the cost of capital. At the same time, it will significantly reduce costs and risks by eliminating brine management. Mosaic expects K3 to generate significant cash flow benefits and expects the completion of the project to improve free cash flow by approximately $ 400 million.
Other actions to consider
Ingevity Corporation (NGVT – Free Report), Quaker Chemical Corporation (KWR), Israel Chemicals Ltd. (ICL – Free Report) are among the top ranked titles in the basic materials sector.
Ingevity has an expected profit growth rate of 21.5% for the current year and ranks first in Zacks. His shares have gained 22% over the last year. You can see the complete list of current stocks of Zacks # 1.
Israel Chemicals has an expected earnings growth rate of 5.4% for the current year and ranks first in the Zacks rankings. The company's shares have increased 33% over the last year.
Quaker Chemical has an expected profit growth rate of 21.1% for the current year and ranks Zacks 2. Its shares have gained 26% in the last year.
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