Freedom Broker analysts downgraded their recommendation on fertilizer producer Mosaic (MOS) shares from “Hold” to “Sell.” At the same time, they raised the target price from $17 to $18 — about 21% below the current quote of $22.795. Experts expect profit to recover in 2027, but считают market expectations overstated: the high cost of sulfur continues to weigh on the company’s phosphate business.
About the company
Mosaic produces phosphate and potash fertilizers. The company mines raw materials, manufactures finished products, and sells them to agricultural producers. A separate unit, Mosaic Fertilizantes, combines production and distribution in Brazil and Paraguay.
Fertilizer price growth did not offset raw-material costs
In Q3 2026, Mosaic’s revenue fell 10% year over year to $3.1 billion. Adjusted EBITDA dropped by almost 60% — from $806 million to $324 million. The adjusted loss per share was $0.19.
The main pressure came from the phosphate segment. Its adjusted EBITDA fell from $128 million in Q2 to $49 million in Q3. Sales volume reached the top end of guidance — 1.4 million tons — and the price of diammonium phosphate, one of the company’s core fertilizers, rose from $773 to $838 per ton. However, that proved insufficient to cover the increase in costs.
The cost of sulfur, which the company used in production and included in cost of sales, increased from $522 to $715 per long ton — about 1.016 metric tons. Costs related to downtime rose from $60 million to $77 million. As a result, the phosphate segment’s gross loss reached $105 per ton of product versus $4 in the prior quarter.
The weakest quarter is still ahead
Management expects Q4 to be the EBITDA low point. Despite a decline in the contract sulfur price to $615 per long ton, the company will begin to feel the financial impact only in Q1 2027.
Until then, higher-priced raw materials will continue to flow into cost of sales. For Q4, Mosaic forecasts sulfur costs in cost of sales at $800–850 per long ton.
Freedom cut its quarterly adjusted EBITDA forecast from $525 million to $232 million. This is well below the FactSet consensus forecast of $378 million. The phosphate segment, according to analysts’ calculations, may post negative EBITDA of $68 million.
Experts reduced the adjusted EBITDA forecast for full-year 2026 by 19% to $1.38 billion.
The potash business supports results but is also under pressure
In Q3, the potash segment generated $284 million in adjusted EBITDA and sold 2.07 million tons of product. It remains Mosaic’s main source of operating profit, but price declines are limiting its outlook.
For Q4, the company expects its realized price for muriate of potash in the range of $255–275 per ton versus $270–290 in the previous quarterly outlook. Mosaic lowered its annual potash fertilizer production guidance from 9 million to 8.6 million tons.
In Brazil, the company also reduced utilization of phosphate capacity — from 47% in Q2 to 27% in Q3. Mosaic Fertilizantes posted $41 million in adjusted EBITDA, mainly thanks to distribution. Costs due to production downtime increased to $70 million.
The 2027 recovery depends primarily on sulfur
Freedom forecasts Mosaic’s adjusted EBITDA to grow by about 28% in 2027 to $1.76 billion. However, this estimate is 13% below the FactSet consensus.
The main contribution should come from a recovery in the phosphate business. A decline in sulfur costs, according to analysts’ calculations, would add about $452 million to annual EBITDA. Additional support will come from cheaper ammonia and reduced downtime-related costs. Part of the improvement will be offset by lower sales volumes and weaker results in the potash segment.
Sensitivity to raw-material costs remains high: a $50 per long ton change in the sulfur price shifts the 2027 EBITDA forecast by roughly $127 million.
Market conditions also provide grounds for a recovery in phosphate margins. Fertilizer exports from China are limited, inventories in Brazil are noticeably lower than a year ago, and Mosaic has already sold out the phosphate volumes planned for Q4. Analysts expect that in 2027 sulfur will become cheaper faster than finished fertilizers.
Cash flow still depends on inventory reductions
Mosaic’s free cash flow in Q3 was only about $2 million. The positive result was driven by the release of $207 million from working capital, including through inventory reductions.
For full-year 2026, Freedom forecasts negative free cash flow of $114 million — even before paying about $280 million in dividends.
Net debt at the end of September reached $5.64 billion, or 3.4x annual adjusted EBITDA. At the same time, the company refinanced long-term liabilities with maturities through 2028 and maintained an undrawn revolving credit facility of $2.5 billion.
For 2027, management plans to cut capital expenditures to below $1 billion and selling, general and administrative expenses to below $500 million.
How Freedom’s valuation changed
In June, Freedom Broker upgraded its recommendation on Mosaic from “Sell” to “Buy” and set a target price of $32. At the time, analysts expected that the restoration of sulfur supplies after disruptions to shipping through the Strait of Hormuz would reduce cost of sales and restore profitability in the phosphate business. The 2027 EBITDA forecast was about $2.28 billion.
The November assessment assumes a weaker recovery: the EBITDA forecast for next year is $1.76 billion. In the new report, Freedom raised its target from $17 to $18, but downgraded its recommendation from “Hold” to “Sell.” The analysts’ main conclusion is that the expected improvement in performance does not yet justify the current share price.
This is not an индивидуальной investment recommendation.