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On Monday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Mosaic (NYSE:MOS), a leading producer of phosphate and potash fertilizers, by reducing the price target from $29.00 to $28.00, while keeping a neutral stance on the stock. Currently trading at $23.92, near its 52-week low of $23.05, InvestingPro analysis suggests the stock may be undervalued. The revision followed Mosaic’s fourth-quarter earnings report, which reflected a decline in performance partly due to disruptions caused by hurricanes.
Mosaic’s adjusted earnings per share (EPS) for the fourth quarter of 2024 stood at $0.45, a decrease of 37% compared to the same period the previous year, and fell short of the market expectations of $0.61 and $0.57 as estimated by MSUSA and Bloomberg respectively. Despite current challenges, InvestingPro data shows three analysts have revised their earnings upward for the upcoming period, with 2025 EPS forecast at $2.21. The company’s adjusted EBITDA also saw a year-over-year decline of 8%, reaching $594 million, albeit slightly surpassing the MSUSA and consensus estimates of $585 million and $539 million.
The company’s results were notably affected by interruptions in phosphate production due to the impact of hurricanes in Florida during the summer. Despite these challenges, the agricultural sector’s outlook has seen some improvement following the United States Department of Agriculture’s (USDA) January WASDE report, which indicated tighter corn supply and demand trends, leading to a rise in corn prices.
In the short term, favorable crop prospects and production cutbacks are expected to drive potash prices higher. However, Mizuho expresses caution, suggesting that the absence of earnings growth and limited potential for sustained high fertilizer prices may dampen investor sentiment towards Mosaic. The management of Mosaic has stated that they do not anticipate a 25% tariff on potash to significantly affect demand or affordability. Supporting this confidence, InvestingPro data reveals management has been actively buying back shares, while maintaining a steady 3.68% dividend yield. Mizuho analysts, on the other hand, express skepticism, positing that farmers might struggle to absorb the increased costs for fertilizers, especially with December 2025 corn prices forecasted to be below $4.75 per bushel. The analysts indicate that farmers are likely to experience the pressure of rising prices for both phosphate and potash fertilizers.
In other recent news, Mosaic Company reported its Q4 2024 financial results, which fell short of analyst expectations. The company announced an earnings per share (EPS) of $0.45, missing the forecasted $0.61, and revenue of $2.82 billion, below the anticipated $2.92 billion. This earnings miss was attributed to a significant $390 million foreign exchange loss that impacted net income. Despite these challenges, Mosaic maintains a positive outlook for 2025, driven by strong agricultural fundamentals and capacity expansions.
In related developments, JPMorgan upgraded Mosaic’s stock rating from Neutral to Overweight and increased the price target to $29 from $26. The firm cited higher expected prices for key fertilizers and the potential for increased sales volumes as reasons for this optimistic outlook. JPMorgan’s analysts project that Mosaic could achieve an EBITDA of $2.4 billion in 2025, surpassing the consensus estimate. Additionally, they anticipate a free cash flow yield of 8% for 2025 and 10% for 2026.
Mosaic’s management has expressed confidence in the company’s future performance, emphasizing operational improvements and financial strength. The company plans to cover dividends and capital expenditures with operating cash flow, aiming for further capital expenditure reductions. Despite current challenges, the company’s executives remain focused on strategic progress and optimizing production to drive growth in the coming years.
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