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CF Industries Reaches 52-Week High

Zacks Equity Research

Shares of CF Industries Holdings Inc. (CF) hit a new 52-week high of $264.53 on Mar 5 and eventually closed at $262.78.

CF Industries’ shares have recorded a one year return of roughly 33%. The company’s long-term estimated earnings per share (EPS) growth rate is 9.4%. Average volume of shares traded over the last three months was around 897K.

What is Driving CF Industries Up?

CF Industries, a Zacks Rank #3 (Hold) stock, posted better-than-expected fourth-quarter 2013 results on Feb 18 with both revenues and adjusted earnings beating the respective Zacks Consensus Estimate.

CF Industries, which is one of the leading fertilizer makers along with Potash Corp. (POT), should benefit from favorable natural gas costs in North America and a solid start to the domestic planting season. Moreover, the company has a strong cash flow profile, which allows it to return value to shareholders and invest in growth initiatives.
Low-cost North American natural gas has been an advantage for CF Industries. The company’s Nitrogen segment is enjoying the benefit of abundant natural gas supply. Moreover, CF Industries is expected to benefit from strong U.S. corn plantations.
Moreover, the acquisition of Viterra Inc.'s 34% interest in the Medicine Hat nitrogen facility underscores CF Industries’ strategy to invest in lucrative projects. Following the acquisition, CF Industries’ annual marketable nitrogen volume rose by roughly 270,000 net tons of ammonia and 275,000 tons of urea. It plans to spend roughly $2 billion on capacity expansion projects this year.

CF Industries added roughly 100,000 tons of ammonia capacity in 2013. The company remains on track with its capacity expansion projects in Louisiana and Iowa. The project in Louisiana consists of new urea and UAN plants that are expected to come on stream in the second half of 2015 and a new ammonia plant which may come online in 2016.

Both projects will expand the company’s production capacity by 25%. CF Industries has made public offering of senior notes worth $1.5 billion. A part of the net proceeds from this offering will be used for capacity expansion projects.

Moreover, CF Industries enjoys abundant cash flows, which will help it to distribute cash to shareholders and invest in the growth of its businesses.

Other Stocks to Consider

Other players in the fertilizer industry worth a look include Chemical & Mining Co. of Chile Inc. (SQM) and The Scotts Miracle-Gro Co. (SMG). Both of these carry a Zacks Rank #2 (Buy).

Read the Full Research Report on POT
Read the Full Research Report on CF
Read the Full Research Report on SMG
Read the Full Research Report on SQM

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