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Why Is CF Industries (CF) Up 6.3% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for CF Industries Holdings, Inc. CF. Shares have added about 6.3% in that time frame.

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 drivers.

CF Industries' Earnings Top Estimates in Q1, Sales Lag

CF Industries swung to a profit of $63 million or 27 cents per share in the first quarter of 2018 as against a loss of $23 million or 10 cents recorded in the year-ago period. Earnings for the reported quarter exceeded the Zacks Consensus Estimate of 23 cents.
 
Net sales decreased roughly 7.7% year over year to $957 million in the quarter owing to lower sales volumes across most segments, partly offset by increased average selling prices across most segments. Sales missed the Zacks Consensus Estimate of $1,051 million.

Segment Review
 
Net sales for the Ammonia segment dipped roughly 24.8% year over year to $212 million in the reported quarter. Ammonia sales volumes fell 27.8% year over year to 664,000 tons owing to unfavorable weather that led to a delay in the start of the spring fertilizer application season in the Southern Plains and the Midwest. Average selling prices rose 3.9% year over year to $319 per ton due to the impact of a tighter global nitrogen supply and demand balance, partly offset by lower sales volumes.
 
Sales for the Granular Urea segment rose roughly 10.9% year over year to $264 million. Sales volumes increased roughly 14% year over year to 982,000 tons, due to higher production volume from the company's Port Neal Nitrogen Complex. Average selling prices for granular urea rose 8.5% year over year to $269 per ton owing to the impact of a tighter global nitrogen supply and demand balance.
 
Sales at the UAN segment fell 10.7% year over year to $283 million. UAN sales volume dipped roughly 9.7% year over year to 1,669,000 in the quarter due to unfavorable weather that led to a delay in the start of the spring application season in the Southern Plains. Average selling prices were essentially flat year over year at $170 per ton.
 
Sales at the ammonium nitrate segment fell 20% year over year to $100 million. Sales volumes fell about 26.6% to 417,000 tons as a result of unfavorable weather that delayed the start of the spring application season in the Northern Hemisphere. Average selling prices increased 9.1% year over year to $240 per ton due to a tighter global nitrogen supply and demand balance.

Financials

CF Industries’ cash and cash equivalents were $936 million at the end of first quarter 2018, down 28.9% year over year.

Long-term debt was $4,693 million, down around 18.8% year over year.

Outlook
 
For the first half of 2018, CF Industries anticipates demand in North America for nitrogen fertilizer to be on par with the first half of 2017. It expects 88-90 million acres of corn, 46 million acres of wheat and 13 million acres of cotton to be planted in the United States, coupled with 25 million acres of wheat and 21 million acres of canola in Canada. The company expects a year-over-year increase in nitrogen imports into Brazil owing to the permanent closure of two Petrobras urea plants in the country in the coming months, partly offset by lower projected corn plantings.
 
The company expects capital expenditures for new activities to be in the range of around $400 to $450 million in 2018, factoring in higher number of plant turnarounds compared with 2017.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

CF Industries Holdings, Inc. Price and Consensus

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

VGM Scores

At this time, CF has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

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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