Mosaic Stock is Finally Giving a Pullback Opportunity

Global fertilizer provider Mosaic NYSE: MOS stock has exploded to the upside following the events of the Russian war with Ukraine. The Russian invasion of Ukraine has forced commodities prices higher especially in wheat futures as Russia/Ukraine is the largest exporter of wheat in the world. Additionally, Russia will ban grain exports to Europe until August 31, 2022, and temporarily suspends fertilizer exports on March 10, 2022. Additionally, global supply chain and logistics disruption in 2021 is expected to continue well into 2022. The Company expects inflationary pressures on input costs notably in relation to its purchases of sulfur and ammonia. Prudent investors seeking a hedge play on rising food and energy prices can watch for opportunistic pullbacks in shares of Mosaic.

Q4 Fiscal 2021 Earnings Release

On Feb. 22, 2022, Mosaic released Q4 fiscal 2021 results for the quarter ending in December 2021. The Company reported earnings per share (EPS) of $1.76 excluding non-recurring items, missing consensus analyst estimates of $1.98, by (-$0.22). Revenues rose 56.3% year-over-year (YoY) to $3.84 billion, missing analyst estimates for $3.93 billion. The Company raised its annual dividend to $0.60 from $0.45 per share. The Company will also initiate a new $1 billion stock buyback program upon completion of the current plan.

Outlook

Global demand for grain and oilseeds are high while stock to use ratios are at 10-year lows. Rising biofuel consumption, food insecurity, and textiles are driving the demand for commodities including coffee, corn, rice, wheat, palm oil, and cotton. Mosaic expects agricultural commodity pricing to continue driving the demand for fertilizers through 2022.

Conference Call Takeaways

Mosaic CEO Joc O’Rourke pointed out the $3.6 billion in EBITDA was the highest total since the Company went public with double digit EBITDA growth across its portfolio of products. The Phosphate segment saw 200% YoY EBITDA growth to $1.7 billion. Potash sales saw 78% EBITDA growth to $1.3 billion. He noted, “Global supply disruptions from 2021 are expected to continue impacting the global market in 2022. In potash, sanctions against Belarus are beginning to have a profound impact on supply. Global buyers are beginning to acknowledge this, including India and China, which both signed contracts with Canpotex at $590 per ton to ensure they have adequate supply for 2022. In phosphates, the secular shift of Chinese supply away from exports towards domestic agriculture and industrial consumption is expected to outlast the short-term export ban currently in place. Over time, we believe domestic demand will drive China’s phosphate exports lower as secular demand trends continue to grow, especially on the industrial side from chemicals and electric vehicles, lithium-ion phosphate batteries.” Input costs and inflation are impacting profitability but offset somewhat by the increasing crop prices. Normal buyer behavior is seen as demand continues heading into the North American spring plating season approaches. K3’s ramping up will enable it to reach full capacity both under budget and two years ahead of schedule. This combined with Belle Plane and Colonsay productions will result in higher production with lower production costs. The Company is focused on returning capital to shareholders in 2022 with up to 75% of its free cash flow through share buybacks and dividends.

MOS Opportunistic Pullback Levels  

Using the rifle charts on weekly and daily time frames provides a precision view of the landscape for MOS stock. The weekly rifle chart uptrend initially peaked near the $64.30 Fibonacci (fib) level. The weekly uptrend spiked sharply as it overshoots the weekly upper Bollinger Bands (BBs) at $61.48 on a rising 5-period moving average (MA) at $52.69 fib followed by the 15-period MA at $43.72 as stochastic stalls at the 90-band for a mini pup or cross back down. The weekly market structure low (MSL) buy triggered on the breakout through $48.11. The daily rifle chart uptrend has a rising 5-period MA at $59.81 followed by the 15-period MA at $52.69 with the daily 50-period MA rising at $45.10 and the 200-period MA at $37.37. The daily stochastic peaked and is stalling just above the 80-break in a make or break that will either trigger a mini inverse pup down through the 80-band or bounce and cross up above the 80-band to drive shares to the daily upper BBs at the $66.87 fib level. Prudent investors can watch for opportunistic pullback levels at the $52.69 fib, $49.36 fib, $46.20 fib, $43.03 fib, $41.92 fib, $38.52 fib, and the $35.83 fib level. Upside trajectories range from the $70.74 fib up towards the $82.51 fib level.