It has been about a month since the last earnings report for CF Industries (CF). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
CF Industries' Earnings & Sales Beat Estimates in Q1
CF Industries delivered profits of $68 million or 31 cents per share in the first quarter of 2020, down from $90 million or 40 cents in the year-ago quarter. Nevertheless, earnings per share beat the Zacks Consensus Estimate of 23 cents.
Net sales fell around 3% year over year to $971 million in the quarter. However, the figure beat the Zacks Consensus Estimate of $891.3 million.
Average selling prices in the first quarter were lower on a year-over-year basis across all segments due to increased global supply availability. This was mostly offset by higher sales volumes across all segments.
Net sales in the Ammonia segment rose 3.2% year over year to $193 million in the reported quarter. Ammonia sales volume rose year over year owing to comparatively favorable weather enabling fertilizer application. Average selling prices of ammonia fell year over year due to higher global ammonia supply availability.
Sales in the Granular Urea segment declined 1.7% year over year to $337 million. Sales volumes rose year over year but average selling prices for urea declined due to increased global supply availability as lower global energy costs led to rise in operating rates.
Sales in the UAN segment fell 8.2% year over year to $235 million. Sales volumes increased year over year but average selling prices declined in the quarter.
Sales in the AN segment declined 8.7% year over year to $116 million. Sales volumes rose year over year on the back of higher demand in North America and Europe. Average selling prices declined year over year due to increased global supply availability.
CF Industries’ cash and cash equivalents rose 12.2% year over year to $753 million at the end of the first quarter. Long-term debt was $3,958 million at the end of the quarter, down 15.8% year over year.
Cash flow from operations amounted to $292 million in the reported quarter, down 4.6% year over year. The company repurchased around 2.6 million shares during the first quarter. Since February 2019, the company repurchased around 10.2 million shares for $437 million.
CF Industries expects positive global nitrogen demand in the near term, driven by higher nitrogen-consuming planted corn and coarse grain acres in North America this year compared with 2019 levels. It projects 92-94 million acres of corn to be planted in the United States in 2020, lower than the U.S. Department of Agriculture’s projection of 97 million acres in March.
CF Industries anticipates North American nitrogen production facilities to remain at the low-end of the global nitrogen cost curve in the near term. This will be supported by access to low-cost North American natural gas.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -15.17% due to these changes.
Currently, CF has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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