In mid July, $23 billion market cap fertilizer company Mosaic Co (NYSE:MOS), which provides both phosphate- and potash-based fertilizers, reported its financial results for the fiscal year ending in May 2013. The fiscal Q4 numbers showed a 5% decline in revenue versus a year earlier, which the company attributed to low demand in emerging markets (particularly India). Mosaic Co (NYSE:MOS) was able to reduce its costs more or less in line with revenue, however, and so with little change in net margins earnings were down at a similar rate. For the year as a whole the company recorded $4.42 in diluted earnings per share, as lower profits over the course of the entire FY were offset by a reduction in weighted average share count. The stock was down between 3 and 4% on the news even though EPS narrowly beat analyst expectations.
At its current price, Mosaic Co (NYSE:MOS) trades at 12 times trailing earnings; fertilizer companies, as well as many other stocks tied to agriculture, tend to carry earnings multiples in roughly the same range. Some analysts believe that a growing and more wealthy global population will lead to higher demand for agriculture in the long term, and combined with the market’s lukewarm attitude towards the industry it is a somewhat common investment theme. Of course, we’ve seen from Mosaic Co (NYSE:MOS)’s recent results that there has been negative growth recently, and even though this is supposed to be a long term trend it would be preferable to see some actual evidence that bulls’ predictions are playing out.
The closest peers for Mosaic Co (NYSE:MOS) are Potash Corp./Saskatchewan (USA) (NYSE:POT) and CF Industries Holdings, Inc. (NYSE:CF). Potash Corp. had grown its revenue and earnings at double-digit rates in the first quarter of 2013 from their levels a year ago, and so at least at that point was doing well.
