Shares in Mosaic Co. increased more than 7% in after-market trading on Monday as the fertilizer maker exceeded Wall Street estimates for quarterly profit.
The stock rose to $14.70 in extended market trading after Mosaic (MOS) reported second-quarter net income of $47.4 million, or 12 cents a share, versus a loss of $233.1 million, or 60 cents a share, in the year-ago period. Adjusted earnings were 11 cents a share beating analyst consensus by $0.12. Total sales declined to $2.05 billion from $2.18 billion year-on-year. Analysts had forecast revenue of $1.84 billion for the quarter.
“We’ve delivered strong results despite low market prices for our products, demonstrating the financial resilience earned through wide-ranging efficiency improvements, including reduction of costs across the company by over $1 billion over the past several years,” said Mosaic CEO Joc O’Rourke. “We expect significant further cost progress in the years ahead.”
O’Rourke said that the company is on track to generate $700 million in additional transformation benefits over the 2019 base in the next 5 years. This includes the $200 million in Mosaic Fertilizantes savings expected by 2022, and $500 million related to North American initiatives, he added.
Mosaic noted that as Covid-19 continued to impact the global economy, agriculture and food security remained global priorities resulting in limited impact to agricultural inputs, including fertilizer and its supply chains.
As of June 30, unrestricted cash totaled $1.1 billion, as the company generated $814 million in cash flows from operations, representing a $301 million increase from the year-ago period, as a result of volume growth and cost costs, as well as improvements in working capital.
Mosaic shares have recovered some of their losses this year but are still trading 34% lower than at the start of 2020 as analysts are cautiously optimistic on the stock with a Moderate Buy consensus. Looking ahead, the $15.85 average price target indicates 16% upside potential over the next 12 months. (See Mosaic stock analysis on TipRanks)
Citigroup analyst P.J. Juvekar last month upgraded Mosaic to Buy from Hold with a price target of $16, up from $13, and opened a “90-day positive catalyst watch” on the shares. Juvekar said he anticipates Mosaic’s countervailing duty petitions against Moroccan and Russian phosphate producers to provide upside to diammonium phosphate prices in the second half of 2020.
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