MOS - Mosaic downgraded to Sector Perform at RBC Capital on phosphate outlook

Mosaic ( NYSE: MOS ) on Monday was downgraded to Sector Perform from Outperform by analysts at RBC Capital who said the fertilizer maker faces risks in phosphate output. The bank also lowered its price target for Mosaic to $65 from $85 a share.

“We still see fertilizer markets as very supply-constrained, but shift our preference to nitrogen and potash versus phosphate,” Andrew D. Wong, analyst at RBC Capital, said in the Oct. 3 report.

He pointed out that phosphate is responsible for about 40% of Mosaic’s EBITDA, while potash makes up about 50%. Despite high crops prices, Chinese restrictions on exports and supply constraints that support phosphate prices, there’s less potential for them to grow.

The bank also cited operational difficulties for Mosaic, which last week evacuated facilities in Florida as Hurricane Ian bore down on the state’s western coast. Fluctuations in production led the bank to lower its estimate of Mosaic’s phosphate production by about 5%.

The downgrade came the same day that RBC Capital upgraded CF Industries ( CF ) to Outperform from Sector Perform because of the improved outlook for nitrogen fertilizer. Lower energy prices in North America help the company to increase its earnings, according to a separate report.

Mosaic's stock this year has risen 23%, contrasting with a 23% decline for the S&P 500 Stock Index ( SP500 ).

Seeking Alpha columnist Michael Wiggins De Oliveira rates Mosaic as a Buy on prolonged demand for fertilizer . Contributor Steven Cress has a Buy rating on Mosaic based on a quantitative analysis .

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