Why Is CF (CF) Down 5.1% Since Last Earnings Report?
It has been about a month since the last earnings report for CF Industries (CF). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
CF Industries' Q2 Earnings Surpass Estimates, Sales Miss
CF Industries reported second-quarter 2023 earnings of $2.70 per share, down from $5.58 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $2.15.
Net sales fell around 47.6% year over year to $1,775 million in the quarter, missing the Zacks Consensus Estimate of $1,850 million.
Segment Review
Net sales in the Ammonia segment decreased 53% to $525 million in the reported quarter, higher than our estimate of $518.5 million. Ammonia adjusted gross margin per ton decreased in first-half 2023 from the year-ago period due to lower average selling prices partly offset by lower realized natural gas prices.
Sales in the Granular Urea segment fell 44.8% year over year to $460 million, lower than our estimate of $460.2 million. Granular urea adjusted gross margin per ton decreased in first-half 2023 from the year-ago period mainly due to a decline in average selling prices partly offset by lower realized natural gas prices.
Sales in the Urea Ammonium Nitrate segment fell around 43.9% year over year to $548 million, lower than our estimate of $606.9 million. Adjusted gross margin per ton decreased in first-half 2023 from the year-ago period mainly due to reduced average selling prices partly offset by a decline in realized natural gas prices.
Sales in the Ammonium Nitrate segment fell around 58.9% year over year to $104 million, lower than our estimate of $146.8 million. Adjusted gross margin per ton decreased in first-half 2023 from the year-ago period due to lower average selling prices partly offset by the impact of using lower-cost imported ammonia for ammonium nitrate production in the U.K. and reduced realized natural gas prices.
Financials
As of Jun 30, CF Industries’ cash and cash equivalents were $3,219 million compared with $2,323 million as of Dec 31, 2022. Long-term debt was $2,967 million at the end of the quarter compared with $2,965 as of Dec 31, 2022.
Net cash provided by operating activities was $712 million in the reported quarter, down nearly 19.9% year over year.
Outlook
According to CF Industries, the global nitrogen supply-demand balance will continue to be positive owing to robust demand from agricultural and forward energy curves displaying an elevated cost curve. Energy price differences between major producers in North America and minor producers in Europe and Asia continue to be significantly higher than historical levels. These stronger differentials are expected to last for a considerable amount of time, based on forward energy curves. According to the company, there will continue to be considerable margin opportunities for low-cost North American producers on the back of the global nitrogen cost curve.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -11.22% due to these changes.
VGM Scores
At this time, CF has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
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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CF Industries Holdings, Inc. (CF) : Free Stock Analysis Report
