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Mosaic (MOS) Gains on Strong Fertilizer Demand and Cost Actions

The Mosaic Company MOS benefits from strong demand for phosphate and potash, its cost actions and higher prices amid headwinds from input cost inflation.

Shares of Mosaic, a Zacks Rank #3 (Hold) stock, have lost 35.9% over the past year against the 31.7% decline of its industry.

 

Zacks Investment Research
Zacks Investment Research


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Mosaic is benefiting from strong demand and prices for phosphate and potash. Higher agricultural commodity prices and attractive farm economics are driving demand for fertilizers globally. Farmer economics remain 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 2023. Higher prices are also likely to drive sales across the company’s phosphate and potash units.

The company, on its fourth-quarter call, said that it expects strong agricultural commodity pricing trends to drive the recovery of demand in the fertilizers market in 2023. Mosaic also noted that the demand for grains and oilseeds is high. Higher biofuel consumption, crop production and concerns over food security are expected to continue to drive elevated crop prices through this year and potentially beyond, resulting in higher global fertilizer demand during the year.

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. Transformational savings are also expected to drive margins in its Mosaic Fertilizantes segment.

However, the company is likely to continue to face headwinds due to high prices of key raw material. Prices of sulfur and ammonia remain elevated, made worse by the uncertainties over the supply from Russia amid the war.  Plant shutdowns and maintenance have also led to a tight supply of raw materials. As such, the company is expected to face margin pressure associated higher input costs. Some impacts of input cost inflation are expected to continue in the first quarter of 2023. Higher costs are likely to continue to impact margins in the Mosaic Fertilizantes segment in the first quarter.

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Steel Dynamics, Inc. STLD, Olympic Steel, Inc. ZEUS and Nucor Corporation NUE.

Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for STLD's current-year earnings has been revised 26.4% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3%, on average. STLD has gained around 22% in a year.

Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 60.6% upward in the past 60 days.

Olympic Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2%, on average. ZEUS has rallied around 28% in a year.

Nucor currently carries a Zacks Rank #2. The Zacks Consensus Estimate for NUE’s current-year earnings has been revised 10.7% upward in the past 60 days.

Nucor beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 7.7% on average. NUE’s shares have gained roughly 6% in the past year.

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Steel Dynamics, Inc. (STLD) : Free Stock Analysis Report

Nucor Corporation (NUE) : Free Stock Analysis Report

The Mosaic Company (MOS) : Free Stock Analysis Report

Olympic Steel, Inc. (ZEUS) : Free Stock Analysis Report

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