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CF Industries Well Poised on High Demand Amid Pricing Woes

Zacks Equity Research

We issued an updated research report on CF Industries Holdings, Inc. CF on Dec 12.

CF Industries, last month, noted that the third quarter witnessed a rapid increase in the global price of urea from second quarter, which was driven by considerably lower Chinese exports, higher production and energy costs, a weaker dollar and strong global demand. The company expects lower Chinese urea export volumes to continue and volatility in nitrogen prices in global markets to continue through 2018.

Shares of CF Industries have moved up 25.4% in the past three months, outperforming the industry’s 5.8% fall.

CF Industries is expected to benefit from higher nitrogen demand. During the last reported quarter, Brazil was major purchaser of nitrogen and India issued three tenders, which resulted in purchase of 1.4 million metric tons urea.

The company expects a consistent global nitrogen demand growth, which should be partly driven by rising global population and industrial growth on the back of increased adoption of emission control, recovering mining sector and synthetic nitrogen products.  

CF Industries is also well placed to gain from its efforts to boost production capacity. It is also enjoying the benefit of abundant natural gas supply.

However, CF Industries remains exposed to pricing pressure due to higher nitrogen supply. High supply levels in the global nitrogen market due to capacity additions are putting pressure on pricing. Nitrogen pricing environment is expected to remain volatile through 2018.

CF Industries Holdings, Inc. Price and Consensus

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

Zacks Rank & Stocks to Consider

CF Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Westlake Chemical Corporation WLK, Daqo New Energy Corp. DQ and Kronos Worldwide Inc. KRO. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Westlake Chemical has an expected long-term earnings growth rate of 10.6%. Its shares have moved up 80.2% year to date.

Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have surged a whopping 162.2% year to date.

Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have rallied 115.8% year to date.

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