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CF Industries' (CF) Earnings & Sales Beat Estimates in Q2

Zacks Equity Research

CF Industries Holdings, Inc. CF delivered profits of $283 million or $1.28 per share in the second quarter of 2019, up from $148 million or 63 cents in the year-ago quarter. Also, earnings per share surpassed the Zacks Consensus Estimate of 81 cents.

Net sales rose 15.5% year over year to $1,502 million in the quarter, mainly driven by higher average selling prices across all major products. The figure also beat the Zacks Consensus Estimate of $1,373 million.

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 jumped roughly 26.5% year over year to $473 million in the quarter. Ammonia sales volume rose 11.7% year over year to 1,222,000 tons. Average selling prices of ammonia rose roughly 13.2% year over year to $387 per ton.

Sales in the Granular Urea segment rose roughly 20.3% year over year to $433 million. Sales volumes increased around 4.3% year over year to 1,496,000 tons. Average selling prices for granular urea rose 15.1% year over year to $289 per ton.

Sales in the UAN segment went up around 8.8% year over year to $369 million. UAN sales volume rose 2.8% year over year to 1,871,000 tons in the quarter. Average selling prices rose roughly 5.9% year over year to $197 per ton.

Sales in the AN segment inched up nearly 1.6% year over year to $126 million. Sales volumes fell around 7% to 528,000 tons. Average selling prices increased 9.6% year over year to $239 per ton.

CF Industries ended the second quarter with cash and cash equivalents of $858 million, up roughly 17.9% year over year. Long-term debt was $4,203 million at the end of the reported quarter.   

Cash flow from operation was $387 million, up 22.5% year over year. The company repurchased roughly 2.7 million shares during the reported quarter.

It is currently executing a $1 billion share repurchase program that is authorized through 2021. Notably, the company has repurchased around 4.2 million shares for $178 million since the authorization was announced in February 2019.

CF Industries is optimistic about the nitrogen fertilizer industry and expects fundamental factors to be positive in the near and the long term.

It expects demand for nitrogen in North America to remain strong in the near term. This is expected to result from the impact of adverse planting and growing conditions in many parts of the United States in 2019. Also, historic flooding is expected to reduce corn production in 2019 due to considerably lower planted acres and yields. The company expects this to create a strong price incentive for farmers in the United States, which will boost planted corn acres considerably over the next two seasons.

Globally, demand for urea from Brazil and India are expected to remain strong over the next two years. Per the company, through the end of June 2019, urea imports to India were 3.5 million metric tons, up 11% year over year. Moreover, urea imports to Brazil for 2019 are projected to rise.

Price Performance

Shares of CF Industries have inched up 0.1% in the past year against the industry’s 10.3% decline.

Zacks Rank & Other Key Picks

CF Industries currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the basic materials space are SSR Mining Inc. SSRM, Kinross Gold Corporation KGC and Arconic Inc. ARNC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SSR Mining has an expected earnings growth rate of 134.8% for 2019. The company’s shares have surged 49.1% in the past year.

Kinross has projected earnings growth rate of 100% for the current year. The company’s shares have gained 17.6% in a year’s time.

Arconic has an estimated earnings growth rate of 38.2% for the current year. Its shares have moved up 18.9% in the past year.

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