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CF Industries' (CF) Earnings Lag Estimates in Q3, Sales Beat

CF Industries Holdings, Inc. CF 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.

 

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise

 

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise
CF Industries Holdings, Inc. Price, Consensus and EPS Surprise

CF Industries Holdings, Inc. price-consensus-eps-surprise-chart | CF Industries Holdings, Inc. Quote

 

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. Its board has authorized a new $3 billion share repurchase program, which will commence upon completion of the existing share repurchase program and run through the end of 2025.

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.

Price Performance

Shares of CF Industries have rallied 76.4% in the past year compared with a 30% rise of the industry.

 

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Zacks Investment Research


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Zacks Rank & Other Key Picks

CF Industries currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Sociedad Quimica y Minera de Chile S.A. SQM, Ryerson Holding Corporation RYI and Reliance Steel & Aluminum Co. RS.

Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 2.1% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 38% in a year. The company currently carries a Zacks Rank #1.

Ryerson Holding, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 74.2% for the current year. The consensus estimate for RYI's earnings for the current year has been revised 3.2% upward in the past 60 days.

Ryerson Holding’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 28.9%. RYI has gained around 15% over a year.

Reliance Steel, currently carrying a Zacks Rank #2, has a projected earnings growth rate of 29.7% for the current year. The Zacks Consensus Estimate for RS's current-year earnings has been revised 0.1% upward in the past 60 days.

Reliance Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 13.6%, on average. RS has gained around 24% in a year.


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