Analyst Previews Mosaic's (MOS) Q1 Earnings; Reiterates Buy

September 24, 2008 11:15 AM EDT

Canaccord Adams is out with a research note previewing The Mosaic Company's (NYSE: MOS) Q1 earnings, which are expected out after the close on Wednesday, October 1. The firm reiterates its Buy rating and $210 price target on shares of Mosaic.

The firm expects Mosaic to report sales of $4.204 billion and EPS of $2.95 for the quarter. These numbers compare to the Street estimates of $4.12 billion in sales and $2.93 in EPS. Canaccord believes "Mosaic will report strong top- and bottom-line growth driven by margin expansion due to continued strength in phosphate and potash pricing." The firm also expects Mosaic's management to reiterate its FY09 production output guidance and issue a pricing outlook for Q2.

Canaccord believes that Mosaic's stock price will "continue to discount a decrease in fertilizer pricing through F2009" until investors "become more comfortable with fertilizer prices..." Despite the somewhat negative sentiment, the firm expects potash prices to rise through '09 and feels investors should buy the stock with the intent of making it a core holding.

Canaccord notes that Mosaic stock currently trades at 5.9x expected FY09 EPS, which compares to its peer group's average of 6.7x. The firm said its price target on Mosaic is based on 15x the firm's FY09 EPS estimate of $14.52.

With shares of Mosaic trading around $86.70 today, Canaccord's $210 price target represents potential price appreciation of more than 140% from current levels.

The Mosaic Company engages in the production and marketing of concentrated phosphate and potash crop nutrients for the agriculture industry worldwide.

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