CF Industries (CF) Shares Rally 23% in 3 Months: Here's Why
CF Industries Holdings, Inc.’s CF shares have popped 22.6% over the past three months. The company has also outperformed its industry’s decline of 0.8% over the same time frame. Moreover, it has topped the S&P 500’s 0.3% decline over the same period.
Let’s take a look into the factors behind this Zacks Rank #3 (Hold) stock’s price appreciation.
Image Source: Zacks Investment Research
What’s Favoring CF?
While CF Industries is exposed to challenges from weaker nitrogen prices, it is benefiting from healthy nitrogen fertilizer demand in major markets and lower natural gas costs. The company is well-positioned to capitalize on rising nitrogen fertilizer demand in major markets. Higher crop commodity prices are contributing to healthy demand globally.
Demand for nitrogen in North America is expected to be driven by high levels of corn planted acres in the United States and favorable farm economics. Moreover, increased planted corn acres, higher crop prices and healthy farm economics are likely to support urea demand in Brazil. CF also expects demand in India to be driven by the government’s plans to maintain high urea volumes in stock.
Lower natural gas prices are also acting in the company’s favor. CF Industries saw a significant decline in natural gas costs in the second quarter of 2023. Average cost of natural gas fell to $2.75 per MMBtu in the second quarter of 2023 from $7.05 per MMBtu in the year-ago quarter. Lower natural gas costs led to a decline in the company's cost of sales. The benefits of reduced gas costs are expected to continue in the third quarter.
CF Industries also remains committed to boosting shareholders’ value by leveraging strong cash flows. Net cash provided by operating activities was $712 million in the second quarter. During the first half of 2023, the company repurchased 3.1 million shares for $205 million, which included the purchase of 2 million shares for $130 million in the second quarter.
Earnings estimates for CF Industries have also been going up over the past two months, reflecting analysts’ optimism. The Zacks Consensus Estimate for CF for 2023 has increased around 1.4%. The consensus estimate for 2024 has also been revised roughly 7.8% upward over the same time frame.
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation CRS, Hawkins, Inc. HWKN and Alamos Gold Inc. AGI.
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 112% over the past year.
Hawkins currently carrying a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 60% in a year.
Alamos Gold currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for AGI's current-year earnings has been revised 7.5% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents, implying year-over-year growth of 53.6%. AGI shares have surged around 84% in a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
Alamos Gold Inc. (AGI) : Free Stock Analysis Report
Hawkins, Inc. (HWKN) : Free Stock Analysis Report
