Oppenheimer upgrades Mosaic on cost cuts and portfolio optimization
Investing.com -- Oppenheimer upgraded The Mosaic Company (NYSE:MOS) to Outperform from Perform and set a price target of $33 given the fertilizer maker's efforts to reduce costs, optimize its product portfolio, and boost production efficiency as key drivers of future growth.
Oppenheimer highlighted Mosaic's internal initiatives to improve operations, which are expected to drive adjusted EBITDA to $3.3-3.5 billion by 2030.
'We believe the LT targets provide a scaffolding for helping investors get comfortable with the self-help opportunities, with the majority of those benefits expected to materialize in the next 12 months,' Oppenheimer said.Mosaic's turnaround in sulfuric acid facilities and normalized phosphate and potash production are expected to generate $600-650 million of EBITDA uplift by 2026, the largest contributor to the projected $650-800 million increase in adjusted EBITDA by 2030.
Phosphate production is expected to return to ~8 million tonnes by 2026. While Potash production is forecast to reach ~9 million tonnes by 2027.Mosaic plans to reallocate $2-3 billion in capital by 2030, focusing on Tier 1 product investments and production assets while maintaining capital efficiencies. The company is also targeting a reduction in CapEx to below $850 million by 2030.
Mosaic's differentiated market access is expected to provide a $100-150 million EBITDA uplift by 2030, driven by expanding performance product production, such as MicroEssentials, in Northern Brazil. Selectively targeting regions in China and India, contributing $60-80 million of adjusted EBITDA uplift by 2030. Increasing North American penetration, adding ~$100 million in adjusted EBITDA by 2030.
Mosaic aims to grow beyond its core phosphate and potash markets by expanding into new products, including biologicals, which are expected to contribute ~$200 million in EBITDA by 2030 with profitability projected by Q4 2025.
Oppenheimer's $33 price target is based on a 5.5x multiple of its updated 2026 EBITDA estimate of $2.62 billion. The firm cautioned that risks include a potential decline in corn prices, which could further hamper phosphate fertilizer demand.
'Our positive thesis assumes MOS execution against its operational turnaround,' Oppenheimer wrote.
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