Will Mosaic (MOS) Beat Earnings Estimates? - Analyst Blog

We expect fertilizer maker Mosaic MOS to beat earnings expectations when it reports first-quarter 2014 results before the opening gong on May 6. Last quarter, it racked up a roughly 18% negative surprise.

 

Why a Likely Positive Surprise?

 

Our proven model shows that Mosaic has the right combination of two key ingredients to beat earnings.

 

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction) for Mosaic is +3.45% - the difference between the Most Accurate estimate of 60 cents and the Zacks Consensus Estimate of 58 cents. This indicates a likely positive earnings surprise.

 

Zacks Rank #3 (Hold): Mosaic's Zacks Rank #3 increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the first quarter.

 

Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.   

 

Expected Earnings Drivers

 

Mosaic is well placed to leverage the rising global demand for grain and oilseeds. The company should gain from its efforts to boost production capacity and cut costs as well as strategic acquisitions including the recently announced takeover of Archer Daniels' ADM fertilizer distribution business. 

 

Mosaic's larger Phosphate segment is expected to benefit from lower raw materials costs and higher selling prices in the first quarter, lending support to the division's margins. Moreover, its Potash unit is expected to see lower sulfur and ammonia costs in the quarter, contributing to the anticipated rise in gross margin. Sales volume for the potash business is also expected to increase year over year in the first quarter. 

 

Other Stocks to Consider

 

Mosaic is not the only firm looking up this earnings season. We also see likely earnings beats coming from these companies in the basic materials sector.

 

Kronos Worldwide, Inc. KRO has an earnings ESP of +30.77% and carries a Zacks Rank #2 (Buy).

 

CF Industries Holdings, Inc. CF has an earnings ESP of +5.63% and sports a Zacks Rank #3 (Hold).