Rising Global Population And Precision Agriculture Will Fuel Fertilizer Demand

Key Takeaways

• Operational improvements and strategic production ramp position Mosaic for significant margin expansion and revenue growth amid global supply constraints and strong demand drivers.
  
• Leadership in advanced fertilizer solutions and transition to low-carbon products enhances long-term earnings potential, market share, and shareholder returns.
  
• Shifting agriculture trends, regulatory pressures, high asset upkeep, innovation risks, and intensifying global competition may threaten Mosaic's relevance, margins, and long-term profitability.

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.

• While analyst consensus expects cost reductions from operational improvements and normalized run rates to improve margins, the scale and structural nature of Mosaic's turnaround is likely to drive unit costs even lower than forecast, especially with extensive asset reliability work now complete, positioning EBITDA margins for record highs as production returns to full rates.
  
• Analysts broadly agree that expanded potash and phosphate capacity, plus increased market access in Brazil, will boost revenues, but the ongoing global supply constraints, minimal new industry capacity until at least 2027, and Mosaic's aggressive production ramp create the potential for outsized revenue growth and margin expansion as the company captures elevated prices and pent-up demand.
  
• Mosaic's leadership in advanced fertilizer solutions, particularly through Mosaic Biosciences, positions it to capitalize on the accelerating shift toward precision agriculture and higher-value specialty products, enabling structural gross margin lift and recurring earnings growth over the next decade.
  
• Growing global population, increasing food security investments, and shrinking arable land are set to drive sustained, secular increases in fertilizer demand, giving Mosaic durable volume growth and pricing power that should underpin long-term revenue and earnings acceleration.
  
• The company is a likely early beneficiary of structural shifts toward low-carbon fertilizers (such as green ammonia) and ongoing industry consolidation, which will translate into premium pricing, expanded market share, and a sustained lift to returns on capital and free cash flow, supporting higher dividends and share repurchases.

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 8.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.4% today to 8.5% in 3 years time.
• The bullish analysts expect earnings to reach $1.2 billion (and earnings per share of $3.93) by about August 2028, up from $940.0 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 15.7x on those 2028 earnings, up from 10.7x today. This future PE is lower than the current PE for the US Chemicals industry at 23.7x.
• Analysts expect the number of shares outstanding to decline by 0.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.13%, as per the Simply Wall St company report.

Mosaic Future Earnings Per Share Growth

Risks

• The accelerating adoption of regenerative and organic agriculture worldwide may structurally dampen demand for synthetic fertilizers, risking long-term revenue declines for Mosaic as its core product mix becomes less relevant to evolving farming practices.
  
• Increasing global climate policy momentum and tighter environmental regulations-including potential carbon pricing and rising nutrient runoff controls-could materially lift Mosaic's compliance and remediation costs, narrowing net margins and pressuring overall profitability.
  
• The persistent need for high capital investment to maintain and upgrade aging mining and processing assets, as highlighted by recent prolonged maintenance at key U.S. phosphate facilities, may compress Mosaic's free cash flow and negatively impact long-term earnings power if returns do not offset ongoing expenditures.
  
• Mosaic's reliance on commodity phosphate and potash markets leaves it exposed to disruptive technological advances, such as precision agriculture or alternative nutrient solutions, which could shrink its addressable market and erode gross margins as fertilizer application rates structurally decline.
  
• Intensifying competition from low-cost global producers, combined with geopolitical and supply chain localization trends, threatens Mosaic's ability to grow export volumes and sustain pricing power, potentially creating sustained downward pressure on revenue and operating income.

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 $1.2 billion, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $31.68, the bullish analyst price target of $49.0 is 35.3% 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.