Weak quarterly sales led to a substantial drop in third-quarter earnings for fertilizer firm Mosaic (NYSE: MOS). After the closing bell yesterday, the phosphate and potash producer reported third-quarter earnings of 13 cents per share, far lower than last year's same-quarter earnings of $1.17 per share.
Not only were the results far worse than a year ago, but they missed the Street's expectations for earnings of 24 cents per share. The current results did include a gain of $47.1 million (seven cents per share) for foreign currency transactions.
Quarterly revenue checked in at $1.376 billion, 36% lower than a year ago and far short of the expected $1.89 billion. The sales decline was blamed on a change in buyer sentiment, thanks mainly to lower grain prices and a inventory build in the distribution supply chains. Of course, the global economic slowdown didn't help either. The firm's quarterly gross margin dropped to 10% of net sales compared to 34% a year ago.
Before we issue laments for MOS, realize that this problem has hit the entire potash/phosphates industry. Total quarterly sales in the industry dropped to $480.8 million in the quarter, down from $547.3 million a year ago. In addition, low customer demand led to sales volume dropping from 2.1 million tons a year ago to 0.8 million this year.
Technically, the stock will need to cling to potential support at the $41 level -- which could find itself under a stern test if the Street interprets the earnings news negatively. The stock was cruising higher along the support of its 50-day moving average, but we shall see if the trendline is strong enough to stand up to any news-related pressure today.
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