Mosaic [NYSE:MOS - $57.99] The Mosaic Company (Mosaic) is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. They operate through three business segments: Phosphates, Potash and Offshore. The Phosphates division produces crop nutrients and animal feed ingredients. The Potash segment mines and processes potash in Canada and the United States. The Offshore segment produces and markets phosphate, potash and nitrogen-based crop nutrients and animal feed ingredients. The Company serves customers in more than 40 countries. As of May 31, 2009, Cargill, Incorporated owned approximately 64.3% of the Company’s outstanding common stock.
EPS in the recently reported fiscal Q3 (ended February 28) were $0.50 versus $0.18 – a big improvement year-over-year but somewhat below the $0.67 analyst estimate. Mosaic shares dropped from $63.80 on March 12th to close at $57.99 on April 5th.
Earnings comparisons going forward will continue to look good as the weak results from FY 2009 are replaced by the recovery mode numbers. Current estimates for the FY ending May 31, 2010 and 2011 are now running about $2.18 and $4.00 although earnings predictability for this industry is not high.
Mosaic is really a long-term play on the worldwide agricultural market. It can benefit from both increased commodity pricing as well as a weakening dollar. I also see it as a future inflation hedge as their raw material holdings can be marked to market upwards if large price increases take hold due to the world’s distrust in financial currencies.
Mosaic was formed in January of 2004 through the combination of Cargill’s fertilizer operations with those of IMC Global. Cargill continues to be the majority owner after assuming 66.5% of the outstanding shares in the merger.
Here are Mosaic’s per share numbers (excluding non-recurring items) as reported by Value Line:
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Mosaic [NYSE:MOS] Oct. 13, 2009 $48.60
52-week range: $21.94 (Nov. 20, 2008) - $59.34 (May 20, 2009)
Mosaic, formed through the merger of IMC Global and Cargill’s crop nutrition business, is a major global producer and distributor of crop nutrients. The company mines, processes, and distributes the three key fertilizer products- potash, phosphate, and nitrogen. Mosaic is #1 worldwide in phosphate and #2 in potash production. They also manufacture and distribute animal feed ingredients. The company serves customers in over 40 countries.
The commodities boom of late 2007 into early 2008 pushed operating margins to record levels in FY 2008 [FYs end May 31]. EPS surged to $4.38 and $4.28 in the past two fiscal years but the current year is expected to come in at only $2.80 /share.
Zacks expects a rebound to $4.44 in FY 2011. MOS was considered a great ‘weak dollar’ play being both an exporter and a commodity producer. As such their shares ratcheted up to $97.60 in late 2007 on the way to their all-time high of $163.30 in 2008.
At today’s quote of $48.60 this appears to be a good ‘cycle low’ entry point for long-term investors. The company recently pre-paid $1 billion in long-term debt leaving the balance sheet with no debt (net of cash on hand).
Dividends were initiated in 2008 and stand at $0.05 quarterly for a small, but well-covered current yield of 0.41%.
Cargill still owns about 64.2% of the outstanding shares from the contribution of their fertilizer operations at the company’s creation in 2004.
The high Beta @1.70 makes for exceptional option premium for those willing to sell calls and puts. This is where I see a great play.
Here is a good looking combination that makes sense to me right now…
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Mosaic [NYSE:MOS] April 16, 2009 $43.69
52-week range: $21.94 (Nov. 20, 2008) - $163.25 (Jun. 18, 2008)
Dividend = $0.05 quarterly = 0.46% current yield
Mosaic was formed in October 2004 through the merger of Cargill’s fertilizer operations with IMC Global. They produce, blend and market crop nutrients and animal feed products in more than 40 countries.
Mosaic shares and its fundamentals were ‘en fuego’ last spring when commodity prices went through the roof. EPS surged from $0.80 in FY 2007 to $4.38 in FY 2008 [fiscal years end May 31] and MOS shares went from $19.50 early in 2007 to $163.25 last June. When the ‘hard asset’ love affair cooled off, MOS shares did also, falling by 86.5% to $21.94 by November 20, 2008.
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