The earnings calendar gets rather thin next week with just a handful of recognizable names scheduled to report. One that should impress options trading investors, though, is fertilizer producer Mosaic (NYSE: MOS). The company reports earnings on Wednesday after the close.
Analysts expect MOS to post $1.07 per share for the quarter, a whopping 114% increase from a year ago. But given that the past four quarters have averaged growth of more than 200%, the current estimate doesn’t seem that far-fetched. In fact, one might even consider it modest.
The stock has performed very well after recent reports, gaining an average of more than 12% in the two weeks following the past three reports. The chart shows that the stock appears poised to once again jump after earnings. The shares have been consolidating above the 75 level, which has provided a fairly solid foundation for the past three months. The 100-day moving average is also in play, as is heavy put open interest at the 75 strike.
We all know the ag story. Higher demand for food crops, higher food prices, higher fertilizer prices, etc. And MOS is right in the middle of it. It’s surprising, then, that we’re seeing a good deal of pessimism toward the stock. The put/call ratio has been on the rise for more than a month to hit its highest point this year. And just seven of 18 analysts rate the stock a “buy,” leaving ample room for upgrades.
There’s a lot to like about MOS — the fundamental story is intact, earnings growth is impressive, the chart show solid support, and expectations appear to be muted. With a history of impressive price action after earnings, we recommend buying the MOS May 80 Call for under four dollars. We’re buying more time since the post-earnings moves have extended over several weeks, so let’s take full advantage of the expected momentum.
Mosaic (NYSE: MOS)
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