MOS: Strong Harvest And Deferred Demand Will Support Future Upside

We trim our Mosaic fair value estimate by approximately $1 to $34 per share, as analysts broadly lower price targets in response to softer near term fertilizer demand, weaker phosphate volumes and margins, and higher expected input costs, partially offset by selective optimism on execution and harvest driven demand.

Analyst Commentary

Street research on Mosaic has turned more mixed as analysts recalibrate expectations for fertilizer pricing, volumes, and input costs. While most price targets have moved lower, views on the stock's risk reward remain divided, with some seeing upside from execution and cyclical recovery, and others focused on rising costs and softer demand.

Bullish Takeaways

• Bullish analysts highlight that near term weakness is partly a function of demand deferral rather than structural decline. This suggests deferred volumes could support a recovery as farmer budgets reset and credit conditions stabilize.
• Several updated models still support Buy or Outperform stances, arguing that Mosaic's valuation already discounts a cautious outlook and that any upside surprise in fertilizer demand or pricing could drive multiple expansion.
• Improved operational execution and stronger performance in segments such as Fertilizantes are seen as proof that management can navigate regional challenges and gradually rebuild credibility with investors.
• A strong U.S. harvest and the potential for fertilizers to surprise to the upside versus low expectations underpin the case that earnings risk may be skewed more favorably over a multi quarter horizon.

Bearish Takeaways

• Bearish analysts point to lower phosphate prices and fragile U.S. phosphate demand, warning that margin pressure in this core business could cap earnings power and justify lower valuation multiples.
• JPMorgan and others flag rising sulfur and ammonia costs as a key overhang on profitability, with higher input costs likely to offset any modest volume improvement and limit near term EBITDA growth.
• Concerns around Brazil farmer credit and affordability, combined with the shoulder season for demand, increase the risk of further demand deferrals, adding uncertainty to Mosaic's volume outlook.
• Several research notes emphasize inconsistent phosphate execution and reduced guidance for 2025 volumes, suggesting Mosaic may struggle to close its valuation gap with peers until earnings visibility improves.

What's in the News

• The U.S. Department of Agriculture and Department of Justice have launched a joint probe into potential antitrust violations among seed and fertilizer suppliers, pressuring shares of Mosaic and other input providers as regulators pledge tougher scrutiny of agricultural competition (Bloomberg).
• The Trump administration is weighing a farm bailout of at least $10 billion funded in part by tariff revenues, a move that could indirectly support fertilizer demand for producers such as Mosaic by stabilizing farmer incomes amid trade related headwinds (Wall Street Journal).
• Mosaic has completed its share repurchase program announced in August 2022, retiring approximately 26.7 million shares, or just over 8% of shares outstanding, for about $1.07 billion, with no additional shares bought in the most recent quarter of the authorization (company filing).

Valuation Changes

• Fair Value Estimate was reduced slightly from approximately $35.22 to $34.22 per share, reflecting a modestly more conservative outlook.
• The Discount Rate increased marginally from about 8.57% to 8.59%, indicating a slightly higher assumed cost of capital.
• Revenue Growth was trimmed from roughly 2.61% to 2.35% annually, signaling a modestly weaker top line growth outlook.
• Net Profit Margin was lowered significantly from about 9.15% to 7.44%, capturing expectations for more sustained margin pressure.
• Future P/E was raised from approximately 12.2x to 14.7x, implying a higher valuation multiple on reduced earnings power.