|Bid||3.50 x 800|
|Ask||3.51 x 900|
|Day's Range||3.44 - 3.53|
|52 Week Range||2.58 - 4.20|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Natural gas is one of the most important inputs required for nitrogen fertilizers. Companies such as CF Industries (CF) that are located in the United States are at a unique advantage with access to low natural gas prices. In its quarterly earnings, CF Industries cited low natural gas as a key driver for improvement in margins.
For nitrogen fertilizer investors, the energy cost is one of the most important considerations because it can account for 60%–70% of the raw materials costs. Companies located in the United States have an advantage compared to companies outside the United States. During the second-quarter earnings call, CF Industries (CF) said, “Increased energy costs, particularly for producers in Europe and China, have raised and flattened the upper half of the global cost curve necessitating higher nitrogen prices.”
With most major fertilizer players done with their second-quarter earnings, we discussed how analysts reacted positively and upgraded stocks like CF Industries (CF), Mosaic (MOS), and Nutrien (NTR). To learn more, read Analysts Are Becoming More Bullish on Fertilizer Stocks. In this series, we’ll discuss why fertilizer stocks received several upgrades from Wall Street analysts.
The current consensus price target for CF Industries stood at $47.95, which rose by almost 9.9% from $43.63 a month ago. The median price target also rose to $50 from $43 a month ago. The stock closed at $48.57 on August 8, which was already above the mean price target and only 2.9% below the median price target.
CF Industries (CF) reported strong second-quarter earnings. After releasing results, the stock popped about 3.8% in the after-hours market session to $45.8 per share. The company managed to beat both top-line and bottom-line estimates during the quarter.
American Midstream Partners (AMID), a midstream MLP involved in natural gas gathering, processing, and compression, was the lowest-performing MLP in the week ended July 27. AMID stock plunged 41.1% last week. It saw a sharp correction following its announcement of a capital allocation strategy, which includes the sale of non-core assets and a distribution cut.
Low natural gas prices have boosted nitrogen fertilizer companies in the US. In the second quarter, CVR Partners (UAN) stated that it experienced a $3 million decline in costs partly due to lower natural gas costs along with lower freight costs.
Urea prices continued to slide last week. Prices reached new highs just a few weeks back. Last week, CVR Partners (UAN) offered insight into urea prices in the first half of this year. Before we discuss that, let’s look at how urea prices fared last week.
Last week, the agribusiness sector inched higher. The VanEck Vectors Agribusiness ETF (MOO) ended the week to July 27 up by 1.2%, while the broader market S&P 500 Index (SPY) increased by 62 basis points over the same period. Let’s look at how fertilizer stocks performed last week.
In the second quarter, CF Industries’ (CF) EPS are expected to rise significantly YoY (year-over-year), by 360% to $0.46 from $0.10. Also, over the next four quarters, the company’s EPS are expected to improve to $1.19 from -$0.07.
CF Industries (CF) sells primarily nitrogen fertilizers, in contrast to Nutrien (NTR), Mosaic (MOS), and Israel Chemicals (ICL), which have exposure to some or all NPK (nitrogen, phosphorous, and potassium) fertilizers (MOO). CF Industries’ sales are expected to grow 8% to $1.2 billion in Q2 2018, marking an improvement from Q2 2017, when its sales fell 1% YoY (year-over-year) to $1.1 billion.
CVR Partners (UAN) reported its second-quarter earnings on July 25. The company missed both top-line and bottom-line estimates, and the stock fell 4.5% after the earnings release.
CVR Energy (CVI) and its subsidiary CVR Refining (CVRR) reported their second-quarter results on July 25 after the markets closed. CVR Refining’s adjusted EBITDA rose to $147 million—compared to $43 million in the same quarter last year. “The quarter’s success was attributable to a $4.88 increase in Group 3 crack spreads, low Renewable Identification Number (RIN) prices and wide crude oil differentials compared to the same period last year,” said Dave Lamp, CEO of CVR Refining’s general partner.
Between July 11 and July 18, natural gas spot prices at Henry Hub fell about 4.2% to $2.72 per MMBtu (million British thermal units). According to the EIA (Energy Information Administration), this decline in prices resulted from higher production or supply of natural gas.
Last week, urea prices slid downwards, continuing the trend from the previous week in both NOLA (New Orleans) and Brazil. At both these locations, urea prices reached a peak in the week ended July 5.
While turnaround at the Coffeyville plant may affect CVR Partners' (UAN) Q2 volumes, it is likely to gain from improved pricing.
CVR Partners (UAN), an MLP involved in the production of nitrogen fertilizers, was the top MLP gainer in the week ended July 13. UAN rallied 9.7% during the week. Overall, the partnership has risen 13.4% since the start of this year.
Last week, which ended July 13, was broadly negative for the agribusiness sector, with the benchmark VanEck Vectors Agribusiness ETF (MOO) ending 19 basis points lower between the closing on July 6 and July 13. On the other hand, the broader market index was positive, rising 1.5% over the same period. The fertilizer sector, however, saw mixed results, as we will see below.
CVR Partners (UAN) is expected to report sales growth of 16% year-over-year as we discussed in the earlier part of this series. CVR Partners is expected to report a loss per share of $0.06 in the second quarter compared to a loss per share of $0.03 in the corresponding quarter a year ago. The consensus analyst estimates for the next four quarters for CVR Partners’ loss per share is estimated at $0.35, which would be better than the loss per share of $0.72 in the previous four quarters.
For the next four quarters, including the second-quarter earnings, CVR Partners’ (UAN) sales are expected to rise by as much as 16%. Wall Street analysts estimate sales growth of $102 million in the second quarter, which would be a 4% year-over-year increase from $98 million in the second quarter of 2017. Since fertilizer sales are highly seasonal in the sense that sales are slow for fertilizer companies (XLB) in the months preceding the winter or harvest months, it is useful to include full-year sales expectations when considering forward-looking estimates.
CVR Partners (UAN) announced today that it will release its second-quarter earnings on July 25 after the market closes. CVR Partners has had a volatile ride so far this year but has managed to deliver a positive return, as we see in the below chart. CVR Partners has returned about 7.9% YTD (year-to-date), which beat the benchmark VanEck Vectors Agribusiness ETF (MOO), which returned losses of 44 basis points YTD.
Last week (ended July 6) was broadly positive for the agribusiness sector, with the benchmark representative VanEck Vectors Agribusiness ETF (MOO) gaining almost 42 basis points week-over-week. Meanwhile, the S&P 500 gained 1.5%.
Back in May, the company said its previous general counsel's departure was related to the "consolidation of CVR Energy’s corporate office in Kansas City, Kansas, with its headquarters in Sugar Land."