The Mosaic Company MOS is gaining from demand strength for phosphate and potash and actions to improve its cost structure. However, it faces headwinds from weak fertilizer prices.



The company’s shares are down 28.6% over a year compared with a 32.8% decline recorded by its industry.

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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

Strong Demand, Cost Actions Aid MOS

Mosaic is benefiting from strong demand for phosphate and potash. Higher agricultural commodity prices and attractive farm economics are driving demand for fertilizers globally. Farmer economics remains attractive in most global growing regions on strong crop demand, affordable inputs, and favorable weather.



Demand for grains and oilseeds remains high along with strong farm economics. Strong agricultural commodity pricing trends and improved farmer affordability are likely to drive demand for fertilizers in the balance of 2023. Strong demand is expected to support the company’s sales volumes.



Mosaic is also taking actions to reduce costs amid a still-challenging operating environment. Its actions to improve its operating cost structure through transformation plans are expected to boost profitability.



The company also remains committed to carrying out investments with high returns with moderate capital expenditures, such as the expansion of MicroEssentials capacity at its Riverview facility, constructing a new blending and distribution center in Palmeirante, Brazil, executing the construction of a purified phosphoric acid plant for sale in North Americ, and installing a Hydrofloat flotation system at Esterhazy's K2 mill. The estimated total capital expenditures for 2023 are $1.3-$1.4 billion.



Mosaic also aims to return substantial free cash flow in 2023 to shareholders. The company strives to maintain a healthy balance sheet.

Weak Prices Ail

Softer potash and phosphate prices may impact the company’s margins. Prices of phosphate and potash retreated since the back half of 2022 from their peak levels attained in the first half riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Lower selling prices hurt sales and margins across the company’s Phosphate and Potash segments in the second quarter of 2023. Despite some recovery of late, weaker year-over-year fertilizer prices are expected weigh on the company’s profitability.

Story continues

The Mosaic Company Price and Consensus

The Mosaic Company Price and Consensus

The Mosaic Company price-consensus-chart | The Mosaic Company Quote

Stocks to Consider

Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation CRS, PPG Industries, Inc. PPG and Universal Stainless & Alloy Products, Inc. USAP.



The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.



Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 60% in a year.



PPG Industries currently carries a Zacks Rank #1. The Zacks Consensus Estimate for PPG's current-year earnings has been revised 3.6% upward over the past 60 days.



PPG Industries’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.3%, on average. PPG shares have gained around 10% in a year.



Universal Stainless & Alloy Products currently carrying a Zacks Rank #2 (Buy). It has a projected earnings growth rate of 160.8% for the current year.



Universal Stainless & Alloy Products has a trailing four-quarter earnings surprise of roughly 33.3%, on average. USAP shares are up around 63% in a year.

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Universal Stainless & Alloy Products, Inc. (USAP) : Free Stock Analysis Report

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