Well, the market is not at all happy with
Mosaic's (MOS) results. When you take a step back and look at the big picture everything still looks fine, but the stock market is not about the big picture - only "beating estimates" and/or "raising guidance" - if you don't; you are toast.
Mosaic is now toast based on how people will treat it.
The stock is now lower than it was a year ago, despite these metrics
Phosphate prices this reporting quarter: $1013
Phosphate prices 1 year ago:
$407
149% price increase
Potash prices this reporting quarter (FOB):
$488
Potash prices 1 year ago:
$164
194% price increase
But again, it doesn't matter right now because expectations on earnings per share were not met - also some language on their phosphate business will spook people who expect continues 150% growth rates I guess. I assumed at a PE of 5-6 expectations of some slowdown were baked into the stock price but I guess that was an optimistic take.
I do want to highlight the trends and management commentary in both nutrients Mosaic is focused on
- Phosphates 1 year ago: $407
- Phosphates previous quarter: $754
- Phosphates this quarter: $1013 (This strong upward price momentum leveled off toward the end of the quarter, causing the average realized price to fall slightly below Mosaic's guidance range)
- Phosphates price guidance for next quarter: "Mosaic's average DAP selling price, FOB plant, for the second quarter of fiscal 2009 is estimated to be between $1,020 and $1,080 per tonne.
So after increasing 150% year over year, phospates pricing is leveling off but still projected to be at a slight increase over the current quarter next time around. Was the expectation that phosphates was going to $2000 next year? I thought the stock's 50%+ drop in 3 months was compensating for this, but I am wrong on that take based on the negative reaction to the report. If prices stay in a 20% band +/- in the next few years the level of cash flow created will be immense. And this is no longer priced as a "growth stock" - so again, 5 or so PE ratio should compensate - but I guess expectations were STILL too high even after the enormous drop in stock price.
The one thing that is definitely not a good thing in the short run is the following comment
Mosaic intends to reduce planned phosphate concentrates production by 500,000 to one million tonnes over the next several months, in response to high inventory levels.
People will panic on that, but further in the earnings report:
Inventories for phosphate producers increased from the low levels of a year ago; however, phosphate fundamentals remain positive and demand is expected to rebound once inventory levels are normalized. Momentum has slowed in the Phosphates business near-term due to the combined effects of soft seasonal demand, higher customer inventory levels and falling raw material costs.