CF (CF) Up 39.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for CF Industries (CF). Shares have added about 39.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CF Industries' Earnings & Sales Miss Estimates in Q3
CF Industries reported a net loss of $28 million or 13 cents per share in the third quarter of 2020 against profits of $65 million or 29 cents in the year-ago quarter. Also, loss per share missed the Zacks Consensus Estimate of earnings of 5 cents.
Net sales fell 18.4% year over year to $847 million in the quarter. The figure also trailed the Zacks Consensus Estimate of $895.2 million.
Per the company, average selling prices in the reported quarter were lower on a year-over-year basis across all segments due to increased global supply availability.
Segment Review
Net sales in the Ammonia segment fell 11.8% year over year to $165 million in the reported quarter. For the first nine months, sales volume rose on the back of greater supply availability. Average selling prices of ammonia fell year over year in the quarter, impacted by higher global supply.
Sales in the Granular Urea segment declined 23.9% year over year to $249 million. Average selling prices for urea declined for the first nine months due to increased global supply availability.
Sales in the UAN segment fell 19.7% year over year to $248 million. Sales volumes rose year over year for the first nine month, while average selling prices declined due to higher global supply availability.
Sales in the AN segment declined 19.9% year over year to $109 million. Sales volumes rose year over year for the first nine months but average selling prices declined due to increased global supply availability.
Financials
CF Industries’ cash and cash equivalents fell 45.7% year over year to $553 million in the third quarter. Long-term debt was $3,960 million at the end of the quarter, down 5.8% year over year.
Cash flow from operations amounted to $223 million in the reported quarter, down 56.3% year over year.
Outlook
CF Industries expects continued positive demand in North America, India and Brazil in 2021. The company projects around 90 million planted corn acres in the United States in 2021. It expects healthy level of corn planting as well as expected rise in wheat and canola acreage to support nitrogen demand in North America. Also, the company sees global nitrogen requirements to remain robust, which is likely to be driven by strong demand for urea imports from India and Brazil.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -93.22% due to these changes.
VGM Scores
Currently, CF has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CF has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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