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What Makes CF Industries (CF) Stock a Solid Choice Right Now

Zacks Equity Research
·4 mins read

CF Industries Holdings, Inc.’s CF stock looks promising at the moment. The company’s shares have popped roughly 25% over the past three months. It is expected to gain from higher demand for nitrogen fertilizers and lower natural gas costs.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

Let's see what makes this Zacks Rank #1 (Strong Buy) stock a compelling investment option at the moment.

Estimates Going Up

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for CF Industries for the current year has increased around 24%. The consensus estimate for 2021 has also been revised 22.6% upward over the same time frame.

Attractive Valuation

Valuation looks attractive as CF Industries’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value fertilizer stocks, CF Industries is currently trading at trailing 12-month EV/EBITDA multiple of 7.02, cheaper compared with the industry average of 8.98.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 6.8%, above the industry’s level of 4.1%.

Favorable Nitrogen Fertilizer Demand

CF Industries should benefit from higher nitrogen fertilizer demand in major markets in 2020. The company expects global nitrogen demand to remain positive in the second half of 2020 and into 2020. Global nitrogen requirements are driven by demand in India and Brazil. Favorable weather and domestic stimulus are driving urea consumption in India. Demand for urea imports into Brazil also remains favorable, partly supported by improved farm incomes. The company expects total urea imports into Brazil to surpass 6.5 million metric tons in 2020.

Lower Natural Gas Costs to Support Margins

Low natural gas costs have been an advantage for CF Industries. The company is enjoying the benefits of access to low cost and abundant North American natural gas supply. It saw lower year-over-year natural gas costs in the first half of 2020, supporting its margins. The natural gas cost advantage is expected to continue for the remainder of 2020.

CF Industries Holdings, Inc. Price and Consensus

 

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

CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Barrick Gold Corporation GOLD, Yamana Gold Inc. AUY and Eldorado Gold Corporation EGO.

Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have gained around 61% in a year. It currently has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yamana Gold has a projected earnings growth rate of 76.9% for the current year. The company’s shares have rallied roughly 84% in a year. It currently carries a Zacks Rank #2 (Buy).

Eldorado Gold has an expected earnings growth rate of 2,225% for the current year. The company’s shares have gained around 35% in the past year. It presently carries a Zacks Rank #2.

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CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
 
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