![]() But commodity companies are highly vulnerable to seasonal and cyclical downdrafts over time. Current estimates post-FY23 expect these relatively high FCF margins to continue. However, its FCF yield is lower than CF Industries ( CF), which last traded at an FCF yield of 18.5%.īut, investors would probably need to ask whether they expect such high FCF yields to continue beyond FY23. Moreover, given its highly robust FCF yield of 14.3% (5Y mean: 5.45%), it could give investors a safe harbor to seek shelter from the recent market volatility. MOS Stock FCF Metrics Look Robustĭespite the surge in MOS stock, its valuation still looks reasonable over the next twelve months. Hence, there is significant flow-through from earnings to FCF, providing robust support against near-term volatility. Notably, Mosaic is expected to report an adjusted net margin of 22.9% and an FCF margin of 18.2% for FY22. Despite that, Mosaic's profitability is expected to remain robust through FY23, despite the topline volatility. But, we believe that the near-term estimates remain fluid, given the current Chinese export situation and the war in Ukraine. However, Mosaic's topline growth is expected to turn negative in FY23. ![]() Therefore, it would be critical for management to provide more visibility over H2'22's trends. However, the company was confident in the price trends and demand factors in its FY22 guidance at its previous earnings call. Nevertheless, Mosaic's revenue growth is also expected to peak by H1'22 and decelerate markedly through H2'22. Therefore, it would still be a robust Q1 card if management could meet or beat the Street's consensus. Nevertheless, the consensus estimates suggest that Mosaic could report $4.08B in revenue, up 77.7% YoY. The company highlighted in its recent sales update for January and February that " sales volumes for the first quarter of 2022 are now expected to be at or near the low end of previous guidance ranges for both Potash and Phosphates." In addition, the company highlighted challenges from the recent rail delays in Canada and Central Florida. Mosaic is scheduled to report its highly anticipated Q1 card on May 2. Mosaic consensus estimates (FY) (S&P Capital IQ) Mosaic consensus estimates (FQ) (S&P Capital IQ) What Investors Should Expect From Mosaic's Earnings Therefore, as Mosaic heads into its Q1 earnings, we suggest investors take profit and wait for a better entry price. While momentum in the stock has returned as investors piled into commodities plays, we think the rotation had already started. However, we also observed a potentially massive bull trap that had already occurred in MOS stock. As a result, investors who entered MOS stock earlier in the year have benefited tremendously. Furthermore, Russia's invasion has intensified, with little signs of ending soon. Concerns over ongoing supply disruption that could turn structural have also exacerbated the recent spikes. The Mosaic Company ( NYSE: MOS) has benefited tremendously from the recent spike in commodity prices and the Russia-Ukraine conflict. Iamporpla/iStock via Getty Images Investment Thesis
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