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Options Traders Position For Earnings for Top Potash Producer

by | Aug 1, 2021

Mosaic (MOS) will report earnings tonight after the close with the Street looking for $0.99 on $2.83B in sales. Next quarter is guided to $0.95/$3.26B and the FY is $3.19/$11.29B, a 30% increase Y/Y. MOS has closed lower each of the last three but higher the prior four. The average closing move has been 6% with a max move of 13.52%. The current implied move is 6.79%. Options flow has been bullish with buyers last week in the weekly $32 calls while the September, December and January options also seeing longer-dated bull risk reversals open. On the chart, shares near a base breakout above $31.75 and the June/July value area high. A run targets $35.50 and the May VPOC. The $11.8B company trades 10X earnings, 1.3X sales, and 17X cash with a 1% yield. MOS is seeing better results this year due to appreciating potash prices which is supporting their NA Phosphates business while digital transformation initiatives are helping drive better EBITDA growth. In early June the company announced closures to their Esterhazy K1 and K2 mine shafts with Esterhazy K3 production ramping up quickly and set to be the lowest-cost potash line in the world. MOS should have a bright outlook with potential sanctions against Belarus creating a better supply dynamic for other producers.  Analysts have an average target for shares of $34 and a Street High $45. RBC raising estimates on 7/8 expecting the strong phosphate and potash market conditions to continue and Mosaic also set to benefit from the completion of the Esterhazy K3 project and re-start of Colonsay into a tightening potash market. Scotiabank positive in June expecting that the Street will need to revisit Mosaic’s 2021 EBITDA outlook with potash hitting fresh highs and news that India will more than double its di-ammonium phosphate subsidy, almost certainly preventing demand destruction. Further, the analyst thinks we could see VALE monetize their stake in the company and believes Mosaic has ample free cash flow to buy back their 9% stake. Short interest is 1.67% and near multi-year lows. Hedge fund ownership fell 12%. Appaloosa a buyer of a new 1M share position.

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