Bernstein Explains Bullish Call On Mosaic

Bernstein named Mosaic Co MOS as its top pick for 2018, and laid out its investment case.

The Analyst

Bernstein analyst Jonas Oxgaard reiterated his Outperform rating on shares and increased his price target from $33 to $44, suggesting 60 percent upside from current levels.

The upward revision to the price target was attributed to the adjustment made to taxes, lower dilution value from Vale and stronger phosphate prices.

The Thesis

Fertilizer prices will be strong in 2018, benefiting Mosaic, a maker of potash and phosphate, Oxgaard said in a Tuesday note. The analyst expects further strength in the already above-consensus prices for both commodities.

Vale SA (ADR) VALE assets the company acquired will contribute about $200 million recurring EBITDA in 2018, after being impacted by a series of one-time impacts and trough commodity prices, Oxgaard said.

Bernstein doesn't view Mosaic's debt burden as a cause for concern, as the company has a plan chalked out to reduce debt. The credit revolver facility eliminated any short-term liquidity concerns, the firm said.

Oxgaard said Mosaic seems to be regaining investor trust, with the third quarter results going a long way to set right its missteps in the first and second quarters. That said, there is more work to be done.

The Price Action

Mosaic shares are up over 27 percent over the past year.

At time of writing, shares were up 2.3 percent to $27.27.

Related Links:

6 Deals Are Live In Chemical Sector: Where Do They Stand?

Will Ag Stocks Flourish Now That California's 5-Year Drought Is Officially Over?