Brazil Expansion And Emerging Markets Will Boost Global Fertilizer Demand

Key Takeaways

• Expansion in Brazil and new product innovation enable Mosaic to capitalize on rising fertilizer demand and global supply tightness, supporting robust top-line growth and margins.
  
• Cost-reduction initiatives and supply constraints in key regions sustain Mosaic’s pricing power and profitability, ensuring stable long-term earnings and strong cash flow.
  
• Heavy dependence on conventional fertilizers, aging assets, and rising global competition threaten Mosaic’s pricing power, margins, and long-term market relevance amid industry shifts.

Catalysts

Through its subsidiaries, produces and markets concentrated phosphate and potash crop nutrients in the United States, Brazil, China, Canada, Paraguay, Argentina, Japan, Colombia, India, Australia, Peru, Mexico, Honduras, the Dominican Republic, Thailand, Indonesia, and internationally.

• Mosaic’s strong presence and expansion in Brazil, along with penetration into new regions and the upcoming Palmeirante facility, enable the company to capture rising demand as agricultural land and crop acreage expand in emerging markets. This directly supports sustained revenue growth and diversification as Brazil is expected to post record fertilizer shipments, absorbing global demand shifts and crop trade flows.
  
• The global trend toward increased food consumption and the need to boost crop yields are expected to drive higher, more resilient fertilizer demand worldwide, as demonstrated by low global stock-to-use ratios and persistent tightness in fertilizer markets. This underlies Mosaic’s ability to maintain elevated prices and expand volumes, lifting top-line revenue and supporting bullish margins.
  
• Advancement and scaling of Mosaic Biosciences, with proprietary high-margin biological and value-added products like Neptunion, position the company as a leader in next-generation crop nutrition. Accelerated adoption of these premium products, supported by strong gross margins approximating sixty percent for proprietary lines, is expected to enhance overall blended margins and deliver outsized EBITDA growth over the next five years.
  
• Large-scale cost-reduction initiatives, improved asset reliability, and the completion of projects like the Esterhazy hydrofloat are expected to lower per-ton production costs in both phosphate and potash segments, driving increased net margins and stable long-term earnings growth as Mosaic reduces its cost base and leverages operating scale.
  
• Tight global supply of essential nutrients—driven by increased phosphate use for industrial applications (e.g., lithium iron phosphate batteries), ongoing supply constraints in key producing countries, and strong demand in major agricultural regions—provide Mosaic with sustained pricing power and market discipline, supporting long-duration high stripping margins and strong cash flow generation.

Mosaic Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mosaic compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mosaic's revenue will grow by 9.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.3% today to 8.9% in 3 years time.
• The bullish analysts expect earnings to reach $1.3 billion (and earnings per share of $4.08) by about July 2028, up from $367.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 14.8x on those 2028 earnings, down from 31.0x today. This future PE is lower than the current PE for the US Chemicals industry at 23.3x.
• Analysts expect the number of shares outstanding to decline by 0.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.68%, as per the Simply Wall St company report.

Mosaic Future Earnings Per Share Growth

Risks

• Mosaic’s heavy reliance on traditional phosphate and potash fertilizers exposes it to risks from growing global adoption of sustainable farming practices and stricter environmental regulations, which could suppress long-term demand for its core products and pressure future revenues.
  
• Advancements in precision agriculture, bio-fertilizers, and alternative nutrient technologies threaten long-term reliance on bulk fertilizers, creating the risk that Mosaic may face eroding pricing power and reduced market relevance, ultimately impacting revenue and margin growth.
  
• Significant exposure to volatile commodity prices for both phosphates and potash creates ongoing risk of margin compression and earnings unpredictability; extended periods of low prices would directly impact Mosaic’s net margins and bottom-line profitability.
  
• Aging production assets and high capital intensity in the fertilizer sector require Mosaic to spend considerably on maintenance, environmental compliance, and asset upgrades, which may drive operating expenses and capital expenditures higher over time, thereby squeezing net margins and reducing free cash flow available for shareholder returns.
  
• Increasing global competitive pressure from low-cost producers in Russia, North Africa, and the Middle East threatens to drive down market prices for fertilizers, placing downward pressure on Mosaic’s revenues and limiting its ability to capture long-term margin expansion.

Valuation

• The assumed bullish price target for Mosaic is $49.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mosaic's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $49.0, and the most bearish reporting a price target of just $27.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $14.5 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 14.8x, assuming you use a discount rate of 7.7%.
• Given the current share price of $35.9, the bullish analyst price target of $49.0 is 26.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.