U.S. Markets closed

Bank Of America Upgrades CF Industries On Strong Q2, Improving 2020 Outlook

Priya Nigam

Despite softness in global nitrogen prices, CF Industries Holdings, Inc. (NYSE: CF) reported strong second-quarter results.

While nitrogen prices may decline further in the back half of 2019, the company is likely to perform better in 2020 than was earlier expected, according to Bank of America.

The Analyst

BofA’s Steve Byrne upgraded CF Industries Holdings from Underperform to Neutral while raising the price target from $38 to $56.

The Thesis

Despite flat-to-declining global nitrogen prices, CF Industries Holdings was able to deliver a second-quarter earnings beat by selling more high-margin urea and capturing higher U.S. inland price premiums, Byrne said in the note.

He added that the company also benefited from a 24% sequential decline in natural gas costs.

Current corn prices could result in a significant increase in global corn acres, which could offset the expected decline in U.S. corn crop, Byrne mentioned.

The analyst raised the EPS estimate for 2020 from $1.84 to $2.93, citing “better expectations for natural gas costs, higher N pricing, lower fixed costs, and a lower share count.” He added that the BofA estimates for the second quarter and 2019 appear “too pessimistic” and that the company seems to have “a clearer earnings path moving into 2020.”

Price Action

Shares of CF Industries declined more than 4.8% to $50.09 at time of publishing on Monday morning.

Related Links:

Earnings Scheduled For July 31, 2019

Benzinga's Top Upgrades, Downgrades For April 18, 2019

Latest Ratings for CF

Date Firm Action From To
Aug 2019 Upgrades Underperform Neutral
Aug 2019 Maintains Hold
Aug 2019 Maintains Buy

View More Analyst Ratings for CF
View the Latest Analyst Ratings

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.