Analysts Call Mosaic's (MOS) Phosphate Production Cut Expected and Claim it Makes Sense
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Price: $24.41 +4.54%
Rating Summary:
11 Buy, 20 Hold, 9 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
11 Buy, 20 Hold, 9 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Shares of Mosaic (NYSE: MOS) are trading down 2.9 percent in the pre-market hours of trading today after the company announced plans to reduce finished phosphate production levels by as much as 250,000 tonnes through March 31, 2012.
"Isolated phosphate market spot prices have become disconnected with the underlying agricultural fundamentals. As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American Spring Season, near term supply of phosphate barges on the Mississippi River has exceeded near-term demand. The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable. In response, we have decided to cut planned production by 250,000 tonnes over the next three months," said Jim Prokopanko, President and Chief Executive Officer.
Goldman Sachs believes the move is an attempt to tighten phosphate supplies against a weak demand backdrop. The weak demand has pushed the Tampa benchmark down by 11 percent since October to $555/mt. The firm is reiterating its Buy rating on the shares, but is lowering its price target from $63 to $59.
To go inline with the company’s new production levels, the firm is cutting its Q3 and FY12 EPS estimates from $1.12 and $5.07 to $0.93 and $4.84.
An analyst at Goldman comments, “We expect production cuts coupled with a healthy US spring P application season will help put a floor under P prices. In addition, we believe cuts make sense for MOS given the margins it generates on finished P products produced with 3rd party rock.”
BMO analyst Joel Jackson notes that the phosphate production cuts were “not unexpected” and still forecasts 2012 will be a year for record setting phosphate demand. The firm is reaffirming its Market Perform rating and $71 price target on the market.
"Isolated phosphate market spot prices have become disconnected with the underlying agricultural fundamentals. As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American Spring Season, near term supply of phosphate barges on the Mississippi River has exceeded near-term demand. The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable. In response, we have decided to cut planned production by 250,000 tonnes over the next three months," said Jim Prokopanko, President and Chief Executive Officer.
Goldman Sachs believes the move is an attempt to tighten phosphate supplies against a weak demand backdrop. The weak demand has pushed the Tampa benchmark down by 11 percent since October to $555/mt. The firm is reiterating its Buy rating on the shares, but is lowering its price target from $63 to $59.
To go inline with the company’s new production levels, the firm is cutting its Q3 and FY12 EPS estimates from $1.12 and $5.07 to $0.93 and $4.84.
An analyst at Goldman comments, “We expect production cuts coupled with a healthy US spring P application season will help put a floor under P prices. In addition, we believe cuts make sense for MOS given the margins it generates on finished P products produced with 3rd party rock.”
BMO analyst Joel Jackson notes that the phosphate production cuts were “not unexpected” and still forecasts 2012 will be a year for record setting phosphate demand. The firm is reaffirming its Market Perform rating and $71 price target on the market.
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