Shares of The Mosaic Company (NYSE:MOS), which produces phosphate, potash, and nitrogen fertilizers for agriculture, collapsed in early morning trading Tuesday after reporting earnings last night. Mosaic actually met analyst predictions for Q3 2020 sales at $2.38 billion. And the company beat on earnings, reporting $0.23 per share in pro forma profit versus analysts' expectation of $0.17. And yet, Mosaic stock was down 14.2% at 9:45 a.m. EST today.
Partly, I suspect, the reason is that Mosaic's numbers weren't nearly as strong as those headlines suggest. Although the company met sales expectations, its sales for the quarter were nonetheless down 13.5% year over year. And although the company beat analyst projections for pro forma profit, its earnings when calculated according to generally accepted accounting principles (GAAP) showed a loss of $0.02 per share.
Management attributed the loss to a gigantic $0.25 per share noncash charge taken to account for "estimated future phosphate asset retirement obligations and an environmental remediation reserve." Whatever the reason, when added to other losses incurred this year, Mosaic is now three-quarters of the way through fiscal 2020 and still unprofitable, losing $0.43 per share.
The news wasn't all bad. While sales declined in dollar value, this was due more to price weakness than to demand weakness. Volumes of fertilizer shipped actually grew 3% year over year, and the company's Mosaic Fertilizantes business recorded its highest quarterly sales volumes since Mosaic acquired it.
Looking ahead to Q4 and 2021, CEO Joc O'Rourke noted that "prices and demand for our products are recovering in 2020, positioning us to benefit from strong price realization in the fourth quarter." And, he added, "fertilizer inventories in the largest global markets remain below average," which could also push prices higher.
Despite all these favorable factors, however, management declined to provide sales or earnings guidance for the quarter, the year, or the year to come. That lack of clarity -- combined with investor frustration at seeing Mosaic continue to lose money despite the "recovering" market -- may be what's weighing on Mosaic shares today.