CF Industries Holdings, Inc. (CF), Mosaic Co (MOS): Can Fertilizer Stocks Make You Some Green?

Mosaic Co (NYSE:MOS) is another leading producer and marketer of crop nutrients. It recently reported net earnings of $486 million, compared to $507 million a year ago, and net sales of $2.7 billion, down from $2.8 billion last year. Though Mosaic Co (NYSE:MOS) set a potash sales record and had strong phosphate sales, they were more than offset by lower realized pricing.

Sales of potash came in at $1.0 billion, 37% of total revenue and flat versus 2012, as record shipments were diluted by lower prices. Potash production was up a whopping 32% to 2.5 million tons. Sales of phosphates were $1.7 billion, down 7% from 2012, primarily driven by weaker selling prices. Volumes were 2.9 million tons, roughly flat to last year.

With an estimated fair value of around $61 at a historical 16 times multiple, Mosaic Co (NYSE:MOS) shares might currently be excessively discounted if the company can come anywhere near normalized revenue of near $9.6 billion, cash earnings of $1.6 billion, and a cash profit margin of around 17.0%.

Potash Corp./Saskatchewan (USA) (NYSE:POT) is the world’s largest producer, by capacity, of potash and third-largest producer of nitrogen and phosphate. In its last quarter, earnings came in at $643 million versus $738 million in 2012. Revenue was $2.1 billion, down from $2.4 billion.

The company’s potash sales were $907 million, 43% of total sales, and down 20% compared to 2012 mainly due to a damaging 18% decline in pricing and a small drop in volume. Nitrogen sales of $602 million, around 29% of all revenue, fell about 3%. Sales volumes were 1.4 million tons, slightly up from 2012, but average-selling prices deteriorated around 7%.

Potash Corp./Saskatchewan (USA) (NYSE:POT)’s current share price looks fairly alluring. At normalized sales of around $7.6 billion, cash earnings of $2.0 billion, and a cash profit margin close to 27.0%, the company’s reasonable business value is about $38 a share at a historical 16 times multiple.

Conclusion

Fertilizer stocks recently took quite a beating, but if the attractive long-term attributes of the industry are valid, it might just be a profitable opportunity to, as Hetty Green put it, “buy when things are low and no one wants them and keep them until people are anxious to buy.”

The article Can Fertilizer Stocks Make You Some Green? originally appeared on Fool.com and is written by Bob Chandler.

Bob Chandler has a long position in CF Industries, Mosaic, and Potash Corp. The Motley Fool owns shares of CF Industries Holdings.

Bob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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