CF (CF) Down 1.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for CF Industries (CF). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
CF Industries' Earnings Lag Estimates in Q3, Sales Beat
CF Industries reported a profit of $438 million or $2.18 per share in the third quarter of 2022 compared with a loss of $185 million or 86 cents in the year-ago quarter.
Barring one-time items, earnings came in at $2.55 per share for the reported quarter, missing the Zacks Consensus Estimate of $3.19.
Net sales climbed around 70% year over year to $2,321 million in the quarter. The figure beat the Zacks Consensus Estimate of $2,303.9.
The company benefited from higher average selling prices across all segments on reduced global supply availability. Supply was impacted by higher global energy costs leading to lower global operating rates and geopolitical factors that disrupted the global fertilizer supply chain.
Sales volumes were higher year over year in the reported quarter, supported by higher supply availability from increased production as well as higher starting inventories compared with the year-ago quarter.
Segment Review
Net sales in the Ammonia segment increased around 54% year over year to $531 million in the reported quarter. Sales volume declined from the prior year’s levels. Average selling prices in the quarter increased year over year on lower supply availability.
Sales in the Granular Urea segment jumped 78% year over year to $689 million. Both average selling prices and sales volume increased in the quarter.
Sales in the UAN segment climbed around 89% over year to $736 million. Both average selling prices and sales volume rose in the quarter.
Sales in the AN segment rose around 53% year over year to $180 million. Sales volumes were down year over year while average selling prices increased on reduced supply.
Financials
CF Industries’ cash and cash equivalents increased nearly three-fold year over year to $2,192 million at the end of the quarter. Long-term debt was $2,965 million at the end of the quarter, down around 14% year over year.
Net cash provided by operating activities was $990 million for the reported quarter, up roughly 44% year over year.
The company repurchased around 6.1 million shares for $532 million during the reported quarter
Outlook
CF Industries sees strong the global nitrogen supply-demand balance to remain tight into 2025, supported by agricultural-led demand and persistently high energy prices in Europe and Asia.
Demand for nitrogen continues to be driven by the need to replenish global grains stocks, per the company. It expects high crop futures prices and healthy farm economics to support high corn and wheat planted acreage in 2023 in North America. India is forecast to tender for urea throughout the balance of 2022 and into 2023 to fully meet higher demand as farmers boost grain production. CF Industries also sees urea exports from China to be in the range of 1.5-2 million metric tons in 2022.
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 -8.07% due to these changes.
VGM Scores
Currently, CF has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, CF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
