CF Industries Holdings, Inc.’s CF shares have popped 20.8% over the past six months. The company has also outperformed its industry’s decline of 2.7% over the same time frame. Moreover, it has topped the S&P 500’s 8.4% rise over the same period.
Let’s take a look at the factors behind this Zacks Rank #3 (Hold) stock’s price appreciation.
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CF Gains on Higher Nitrogen Demand, Lower Gas Costs
CF Industries is benefiting from healthy nitrogen fertilizer demand in major markets and lower natural gas costs amid headwinds from lower nitrogen prices. 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.
In North America, demand for nitrogen is expected to be driven by high levels of corn planted acres in the United States, low channel inventories and favorable farm economics. Increased planted corn acres and healthy farm economics are also likely to support urea demand in Brazil. Urea demand in India is also being supported by strong agricultural production. CF envisions demand to remain strong through the end of 2023 and into 2024, led by India and Brazil.
Lower natural gas prices are also acting in the company’s favor. CF Industries saw a significant decline in natural gas costs in the third quarter of 2023. Average cost of natural gas fell to $2.54 per MMBtu in the third quarter from $8.35 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 fourth quarter.
Moreover, the company remains committed to boosting shareholders’ value by leveraging strong cash flows. During the first nine months of 2023, the company repurchased 5 million shares for $355 million, which included the purchase of 1.9 million shares for $150 million in the third quarter.
CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Denison Mines Corp. DNN, Axalta Coating Systems Ltd. AXTA and The Andersons Inc. ANDE.
Denison Mines has a projected earnings growth rate of 100% for the current year. DNN has a trailing four-quarter earnings surprise of roughly 225%, on average. The stock is up around 59% in a year. It currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for Axalta Coating Systems’ current year has been revised upward by 8.2%. AXTA, carrying a Zacks Rank #1, beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 6.7%. The company’s shares have gained 20% in the past year.
Andersons currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 5.1% upward over the past 60 days. Andersons beat the Zacks Consensus Estimate in three of the last four quarters. It delivered a trailing four-quarter earnings surprise of 32.8%, on average. ANDE shares have rallied around 34% in a year.
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