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CF Industries (CF) Soars to a 52-Week High, Time to Cash Out?

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Have you been paying attention to shares of CF Industries Holdings CF? Shares have been on the move with the stock up 14.3% over the past month. CF hit a new 52-week high of $50.54 in the previous session. CF Industries Holdings has gained 15.8% since the start of the year compared to the -4.3% move for the Basic Materials sector and the 7.9% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on August 1, 2018, CF Industries Holdings reported EPS of $0.63 versus consensus estimate of $0.42 while it beat the consensus revenue estimate by 8.45%.

For the current fiscal year, CF Industries Holdings is expected to post earnings of $1.15 per share on $4.33 billion in revenues. This represents a 560% change in EPS on a 4.79% change in revenues. For the next fiscal year, the company is expected to earn $1.76 per share on $4.56 billion in revenues. This represents a year-over-year change of 53.91% and 5.42%, respectively.

Valuation Metrics

CF Industries Holdings may be at a 52-week high right now, but what might the future hold for CF? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

CF Industries Holdings has a Value Score of B. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 43X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13.9X versus its peer group's average of 13.9X. Additionally, the stock has a PEG ratio of 7.16. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

CF Industries Holdings, Inc. Price and Consensus

 

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

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, CF Industries Holdings currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if CF Industries Holdings passes the test. Thus, it seems as though CF shares could have potential in the weeks and months to come.


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