It has been about a month since the last earnings report for CF Industries Holdings, Inc. CF . Shares have lost about 14.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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’ Q4 Loss Wider than Expected, Sales Miss
CF Industries swung to a loss of $ 320 million or $ 1.38 per share in the fourth quarter of 2016 from a profit of $ 27 million or $ 0.11 per share recorded a year ago. The results in the reported quarter include impairment charges of $ 134 million related to the company’s investment in Point Lisas Nitrogen Limited.
Barring one-time items, adjusted loss came in at $ 0.39 per share for the quarter, versus earnings of $ 0.72 per share recorded a year ago. Loss per share was wider than the Zacks Consensus Estimate of a loss of $ 0.06.
Sales slipped roughly 22% year over year to $ 867 million in the quarter, and missed the Zacks Consensus Estimate of $ 905.6 million. Sales were hurt by reduced average selling prices across all segments. Excess nitrogen supply continued to weigh on prices in the quarter.
Segment Review
Sales for the Ammonia segment plunged roughly 44% year over year to $ 211 million in the reported quarter. Ammonia sales volumes fell 7% year over year to 762,000 tons, affected by unfavorable weather conditions and certain economic factors. Average selling prices declined 40% to $ 277 per ton owing to excess global nitrogen supply.
Sales for the Granular Urea segment dipped roughly 3% year over year to $ 189 million. Sales volumes jumped 25% year over year to 883,000 tons, driven by additional volume available for sale from the company’s Donaldsonville Nitrogen Complex. Average selling prices for granular urea declined 22% to $ 214 per ton owing to elevated global nitrogen supply.
Sales in the UAN (urea ammonium nitrate solution) segment dropped 17% year over year to $ 305 million. UAN sales volume jumped 28% to 2,047,000 in the quarter due to additional volume available for sale from the Donaldsonville plant. Average selling prices went down 35% to $ 149 per ton, hurt by elevated global nitrogen supply.
Sales in the AN (ammonium nitrate) segment fell 19% year over year to $ 93 million. Sales volumes rose 9% to 541,000 tons on higher volumes across North America and the U.K. Average selling prices dropped 26% to $ 172 per ton on excess nitrogen supply.
The Other segment’s sales rose around 9% year over year to $ 69 million. Sales volumes were 24% higher in the reported quarter at 450,000 tons. Average selling price decreased 13% to $ 153 per ton due to high levels of global nitrogen supply.
Financials
CF Industries’ cash and cash equivalents were $ 1,164 million at the end of 2016, a four-fold year over year rise. Long-term debt was $ 5,778 million, up around 4% year over year.
Outlook
CF Industries sees demand for nitrogen in North America to be relatively unchanged on a year over year basis in 2017. The company envisions 89.5 million acres of corn to be planted and less than 50 million acres of wheat to be planted in the U.S. this year. In Canada, reduced grain planting is expected to be more than offset by higher canola plantings. As such, the company sees total nitrogen fertilizer demand in North America to be roughly 16 million nutrient tons for 2017.
CF Industries anticipates nitrogen prices to continue to improve in North America during the first half of 2017. However, an uncertain pricing environment is expected during the second half as additional nitrogen capacity comes online globally including a considerable increase in North America.
For 2017, the company expects new capital expenditures in the band of around $ 400 to $ 450 million for sustaining and other operations.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month, the consensus estimate has shifted by 445% due to these changes.
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 Industries’ stock has a poor Growth Score of ‘F’, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of ‘D’ on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of ‘F’. If you aren’t focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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CF Industries Holdings, Inc. (CF): Free Stock Analysis Report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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