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CF Industries Up 41% in 6 Months: What's Behind the Rally?

Anindya Barman
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CF Industries Up 41% in 6 Months: What's Behind the Rally?

Upbeat outlook for nitrogen demand and pricing have contributed to the rally in CF Industries' (CF) shares.

Shares of CF Industries Holdings, Inc. CF have shot up around 41% over the past six months, significantly outperforming the industry’s growth of roughly 25%.

CF Industries, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $12.3 billion and average volume of shares traded in the last three months was around 2,469.3K. The company has an expected long-term earnings per share growth rate of 6%.  

Let’s take a look into the factors that are driving this fertilizer company.



 

What’s Working in Favor of CF?

Upbeat outlook for nitrogen demand and pricing have contributed to the rally in CF Industries’ shares. CF Industries benefits from higher nitrogen demand driven by healthy corn plantations and cyclical recovery in the nitrogen fertilizer industry.

The company, in its second-quarter call, said that it expects strong demand in Brazil through the remainder of 2018. It sees a year-over-year increase in urea imports to Brazil during the second half of 2018 partly owing to the expected lost production from the scheduled closure of two Petrobras urea plants in August.

Moreover, CF Industries is poised to benefit from higher prices of nitrogen fertilizers. Higher production costs across Europe and China coupled with reduced production due to the enforcement of environmental regulations in China tightened global nitrogen supply and demand balance and boosted nitrogen prices during first-half 2018.

These factors are expected to continue to drive prices in the third quarter. The company also expects demand in Brazil and India to support global nitrogen prices through the balance of 2018.

Earnings estimates for CF Industries have also moved north over the past two months. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 43% to $1.43. The Zacks Consensus Estimate for 2019 has also moved up 7.1% over the same timeframe to $1.81.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of a staggering 672%. For 2019, earnings are expected to rise 26.6% year over year.

CF Industries Holdings, Inc. Price and Consensus

 

CF Industries Holdings, Inc. Price and Consensus | CF Industries Holdings, Inc. Quote

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Ingevity Corporation NGVT, Huntsman Corporation HUN and ArcelorMittal MT, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have rallied around 75% in a year.

Huntsman has an expected long-term earnings growth rate of 8.5%. The company’s shares have gained around 7% in a year.

ArcelorMittal has an expected long-term earnings growth rate of 4.8%. The company’s shares have gained around 29% in a year.

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