The Mosaic Company MOS benefits from healthy demand for phosphate and potash, high-return investments and actions to improve its cost structure amid headwinds from soft fertilizer prices.

MOS’ shares are down 12.7% in a year compared with the Zacks Fertilizers industry’s 6.8% decline.

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Let’s find out why MOS stock is worth retaining at the moment.

Mosaic Gains on Healthy Demand & Cost Actions

Mosaic is gaining from the strong demand for phosphate and potash, aided by favorable agricultural conditions. Attractive farm economics is driving demand for fertilizers globally. Farmer economics remain favorable in most global growing regions due to strong crop demand and affordable inputs.

Demand for grains and oilseeds remains high globally. Improved farmer affordability is also likely to continue to drive demand for fertilizers. Improved crop prices have also incentivized fertilizer application by growers. In North America, strong yields and growers’ need to replenish soil nutrients have ushered in a favorable environment. Demand in Brazil is also expected to be driven by healthy grower economics and low levels of inventories. Low inventory levels and pent-up purchases are also expected to drive demand in India.

MOS is 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. MOS remains on track with its cost-reduction plan, which is expected to drive $150 million in run-rate cost reductions by the end of 2025.

Mosaic also remains committed to carrying out investments with high returns with moderate capital expenditures. It has completed the 800,000-ton MicroEssentials capacity conversions with volumes expected to rise 25% in 2025. The Esterhazy Hydrofloat project, which will add 400,000 tons in milling capacity, is expected to be completed by the middle of 2025, followed by a ramp-up by the end of the year. The construction of a new blending and distribution center in Palmeirante, Brazil is also expected to be completed by mid-2025. The facility is expected to enable Mosaic Fertilizantes to increase overall sales by one million tons.

Soft Fertilizer Prices Ail MOS Stock

Weak fertilizer prices are likely to weigh on MOS’s sales and margins. Prices of phosphate and potash have retreated since the back half of 2022 from their peak levels attained in the first half, riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Lower potash selling prices hurt the company’s sales in the fourth quarter. Net sales declined nearly 11% year over year to $2,815.9 million in the quarter. While prices have recovered somewhat lately, weaker year-over-year selling prices are likely to continue to dent the company’s top line in the first quarter of 2025.

The Mosaic Company Price and Consensus

The Mosaic Company price-consensus-chart | The Mosaic Company Quote

MOS’ Zacks Rank & Key Picks

MOS currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Axalta Coating Systems Ltd. AXTA, Ingevity Corporation NGVT and Carpenter Technology Corporation CRS. While AXTA and NGVT sport a Zacks Rank #1 (Strong Buy), CRS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axalta Coating’s 2025 earnings is pegged at $2.51, indicating a rise of 6.8% from year-ago levels. AXTA beat the consensus estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.3%, on average. 

The Zacks Consensus Estimate for Ingevity’s 2025 earnings is pegged at $4.45, indicating a rise of 26.8% from year-ago levels. The consensus estimate for NGVT’s 2025 earnings has increased by 29% in the past 60 days. 

The consensus estimate for Carpenter Technology for the current fiscal year stands at $6.95, reflecting a 46.6% year-over-year increase. CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. 

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Carpenter Technology Corporation (CRS) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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