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What's in the Offing for CF Industries (CF) in Q1 Earnings?

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CF Industries Holdings, Inc. CF is set to release first-quarter 2018 results after the closing bell on May 2.

 

The fertilizer maker’s adjusted loss came in at 2 cents per share for the fourth quarter of 2017, which was narrower than the Zacks Consensus Estimate of a loss of 11 cents.

 

Net sales increased roughly 27% year over year to $1,099 million in the quarter. It also beat the Zacks Consensus Estimate of $1,039 million.

 

CF Industries beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing in one, with an average positive earnings surprise of 72.87%.

 

CF Industries has outperformed the industry it belongs to over the last six months. The company’s shares have moved up around 47.9% over this period, compared with roughly 25% gain recorded by the industry.

 

 

 

 

Let’s see how things are shaping up for this announcement.

 

Factors at Play

 

CF Industries benefits from higher nitrogen demand driven by healthy corn plantations and cyclical recovery in the nitrogen fertilizer industry. The company expects India and Brazil to be major drivers for urea demand in 2018.

 

Brazil imported roughly 5.4 million metric tons of urea in 2017, up 15% year over year and has emerged as a major importer of the nutrient. India is expected to import roughly 500,000-1,000,000 metric tons during the first quarter of 2018. Import demand is also expected to be healthy in North America in 2018.

 

Moreover, CF Industries is likely to benefit from higher prices of nitrogen fertilizers. Higher selling prices boosted the company’s sales in the fourth quarter. Tighter global nitrogen supply and demand balance supported nitrogen prices in the quarter.

 

CF Industries expects higher energy costs in major producing regions, lower production in China, a weaker U.S. dollar, increased oil and freight costs and a steady global demand to support nitrogen prices during first-half 2018 at levels higher than the comparable period a year ago.

 

The Zacks Consensus Estimate for revenues for CF Industries for the to-be-reported quarter stands at $1,051 million, reflecting an increase of 1.3% from the year-ago quarter and a 4.4% decline from the sequentially prior quarter.

 

The Zacks Consensus Estimate for average selling prices for the company’s Ammonia unit for the first quarter stands at $330 per ton, reflecting an expected increase of 7.5% from the year-ago quarter. The Zacks Consensus Estimate for the Granular Urea segment stands at $260 per ton, representing an expected 4.8% year over year increase.

 

Moreover, average selling price for the UAN unit is expected to rise 1.8% year over year as the Zacks Consensus Estimate stands at $174 per ton. The Zacks Consensus Estimate for the Ammonium Nitrate (AN) unit stands at $223 per ton, representing an expected 1.4% year-over-year increase.

 

In respect to volumes, ammonia sales volumes are projected to suffer a 4.6% year-over-year decline in the first quarter as the Zacks Consensus Estimate is pegged at roughly 878,000 tons. The Zacks Consensus Estimate for granular urea sales volume is pegged at 1,036,000 tons, reflecting an 8.1% year-over-year rise. UAN sales volume is expected to dip 4.1% year over year as the Zacks Consensus Estimate stands at 1,774,000 tons. Moreover, the Zacks Consensus Estimate for sales volume for the AN unit is 563,000 tons, marking a 0.9% year-over-year fall.

 

 

CF Industries Holdings, Inc. Price and EPS Surprise

 

 

CF Industries Holdings, Inc. Price and EPS Surprise | CF Industries Holdings, Inc. Quote

 

Earnings Whispers

 

Our proven model does not show that CF Industries is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:

 

Zacks ESP: The Earnings ESP for CF Industries is -17.39% as the Most Accurate estimate is pegged at 19 cents while the Zacks Consensus Estimate stands at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: CF Industries currently carries a Zacks Rank #2, which when combined with a negative ESP, makes surprise prediction difficult.

 

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

Stocks to Consider

 

Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

 

Koppers Holding Inc. KOP with an Earnings ESP of +5.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Univar Inc. UNVR with an Earnings ESP of +2.63% and a Zacks Rank #1.

 

Huntsman Corporation HUN has an Earnings ESP of +4.35% and carries a Zacks Rank #2. 

 

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