Mosaic Q2 Earnings Preview: More Downside?

Mosaic

, a leading fertilizer company, will report its earnings for the second quarter on Friday. Currently, analysts expect earnings to come in at $0.98 per share -- a sharp drop in expectations. Three month ago, analysts were looking for $1.33 per share. The reduction in earnings expectations is due to a decrease in year-over-year earnings for each of the previous three quarters. The most recent quarter showed a significant decline of 18.8 percent from the first quarter of 2011. Mosaic reduced its second quarter sales volume projections in November, citing weak demand. The company did, however, indicate that it believed long term sales projections were strong. Some analysts seem to be in agreement with this assessment. Analysts at Goldman Sachs reiterated their “Buy” rating on the company ahead of earnings. Goldman recommends that investors buy on any weakness following the upcoming earnings report, as they continue to like shares over the longer term. Not everyone is in agreement with Goldman's point of view, however. Standpoint Research downgraded its rating on Mosaic on Wednesday, dropping the company from "Buy" to "Hold." Standpoint comments, “…another name that was oversold … we got the bounce that we were looking for and can no longer leave our highest recommendation attached.” If the sales expectations held by both the company and Goldman are on point, the upcoming earnings report could indeed represent a buying opportunity. Investors could buy the stock at a sharply reduced price, and then see profit as soon as the end of the company's next fiscal quarter. Contracts in China and India could offer the most potential upside in future quarters. There remains the possibility, however, that the market has already priced in these third quarter sales projections; investors should therefore pay close attention to the market's reaction to the release of the report on Friday.