Scotiabank cuts Mosaic stock price target to $31 from $34

On Monday, Scotiabank (TSX:BNS) analyst Ben Isaacson adjusted the price target for Mosaic (NYSE:MOS) shares, bringing it down to $31.00 from the previous $34.00, while maintaining a Sector Outperform rating. The stock currently trades at $23.92, near its 52-week low of $23.05, according to InvestingPro data. Isaacson provided an overview of the factors influencing his investment thesis, noting that while market-driven positives exist, company-specific negatives have hindered Mosaic’s performance. The analyst pointed out that the stock has reached lows not seen since the COVID-19 pandemic nearly five years ago, indicating investor dissatisfaction.

Isaacson emphasized that for Mosaic to improve its standing, it needs to achieve significant advancements in two key areas. First, the company must enhance its portfolio performance, which could involve increasing the reliability of Phosphorus and Potassium (P+K) production or refining the portfolio by selling non-core or underperforming assets. Second, Mosaic needs to improve its Free Cash Flow (FCF) conversion from Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), focusing on more judicious capital expenditure. InvestingPro data shows the company generated $2.2 billion in EBITDA over the last twelve months, with management actively buying back shares despite challenges.

The analyst relayed direct feedback from investors last Friday, who expressed the need for Mosaic to demonstrate these improvements. Without such changes, expectations are that the company will continue to underperform. Despite the recent setbacks, Isaacson still believes that Mosaic’s portfolio presents the best upside opportunity potential compared to its industry peers. He acknowledged that this optimistic outlook was previously expressed when the stock was at $28, and now, even with the stock at $24, the sentiment remains. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with three analysts recently revising their earnings estimates upward. For deeper insights into Mosaic’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

In other recent news, Mosaic’s fourth-quarter 2024 financial results showed a decline in performance, with earnings per share (EPS) at $0.45, falling short of the anticipated $0.61. Revenue also missed expectations, totaling $2.82 billion compared to the forecasted $2.92 billion. The company’s adjusted EBITDA was $594 million, slightly above some estimates but still reflecting an 8% year-over-year decline. These results were affected by disruptions in phosphate production due to hurricanes in Florida. Despite the setbacks, Mosaic maintains a positive outlook for 2025, supported by strong agricultural fundamentals and planned capacity expansions.

Analyst opinions on Mosaic have varied, with Mizuho (NYSE:MFG) maintaining a neutral rating while lowering the stock target to $28, citing concerns over earnings growth and fertilizer price sustainability. In contrast, JPMorgan upgraded Mosaic to Overweight, raising the price target to $29, driven by expectations of higher fertilizer prices and improved sales volumes. The firm projects Mosaic’s EBITDA could rise to $2.4 billion in 2025, surpassing consensus estimates. These developments reflect differing perspectives on the company’s potential amidst recent challenges and future opportunities.

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