Best Stocks for 2018 Update: MOS Makes a Monster Rebound
July 1, 2018
The second quarter ended back around where it started in the overall market, but my Best Stocks for 2018 contest pick, The Mosaic Company (MOS), did a heck of a lot better. (A quick refresher: This is the world’s leading producer of concentrated phosphate and potash. In simpler words, it is a crop nutrition company whose goal is to help the world’s increasing population grow the food it needs. In fact, MOS is recognized as an innovator in its field.)
After a tough first quarter, the stock has made a monster move – up 17% since I last updated you on April 3 and 9.3% year-to-date. As a matter of fact, on June 14 it hit a new 52-week high of $29.95. This doesn’t surprise me, as the fundamentals still look really good here.
On May 5, MOS reported first-quarter earnings of $0.20 per share, up from $0.04 per share last year but below estimates for $0.24. Revenue grew nearly 19% to $1.9 billion and was roughly in line with estimates. Full-year earnings guidance was strong, coming in at $1.20-$1.60 per share – up from previous guidance of $1-$1.50 per share – and well above Wall Street’s consensus of $1.47 per share.
Significant Upside Room
For the next quarter, analysts are calling for earnings of $0.39 per share on a 34.5% jump in revenue to $2.36 billion. Overall, the company has a good history of beating estimates, so I don’t expect the upcoming results to disappoint, especially since phosphate and potash prices are rebounding and continue to have significant upside driven by large demand. I see shipments and pricing power improving, and I also look for cost controls, including lower SG&A expenses.
On the technical side, the chart is very attractive. When we last spoke, the stock had fallen below its 50-day moving average (the blue line) and was attempting to hold its 200-day average (the red line). It did, and the bounce off that that level is what led to MOS’ big rebound.
MOS was able to recapture its 50-day average in mid-April and officially confirmed it as support in early May. It went on to print a series of higher highs and higher lows, and even though it has dipped back in the recent market volatility I like that the 50-day continues to act as an additional level of strong support. With solid fundamentals and technicals still in play, I continue to see MOS breaking through current resistance near $30. From there, it has potential up toward $33 and possibly beyond.