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CVR Partners (UAN) Q2 Earnings: Stock Set to Disappoint?
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CVR Partners, LP (UAN - Free Report) is set to release its second-quarter 2016 results ahead of the bell on Jul 28.
Last quarter, the company reported earnings of 25 cents per share, beating the Zacks Consensus Estimate of 21 cents and thereby posting a positive earnings surprise of 19.05%. Net sales of $73.1 million for the quarter also surpassed the Zacks Consensus Estimate, delivering a positive surprise of 29.61%.
However, on a year-over-year basis, the company’s performance suffered, with net sales as well as earnings in first-quarter 2016 witnessing a decline from the year-ago quarter. Net sales and net income fell 21.5% and 39%, year over year, respectively.
Let’s take a look at how things are shaping up for this announcement.
Factors to Consider
CVR Partners, in its first-quarter call, noted a volatile current pricing environment for nitrogen fertilizer, down about 20% year over year. Urea prices have been under pressure due to higher supply from Chinese producers.
Excess inventory has further put pressure on prices of nitrogen fertilizers. The company faces intense pricing competition from other producers, domestic as well as international. Lower cost of natural gas, which is used as primary feedstock by most of the competitors, unfavorably impacts CVR Partners’ position compared to other nitrogen fertilizer makers.
The acquisition of Rentech Nitrogen was completed in the second quarter. The two companies operate similarly and integrate well. Management expects to achieve the previously stated combined synergies of $12 million over time. The company is also looking to increase production at the Coffeyville plant. Management implemented several measures for this purpose which proved to be successful. Ammonia production is expected to further increase in the second half of 2016.
For full-year 2016, CVR Partners expects maintenance capital expenditure in the range of $7−$10 million for Coffeyville and between $10−$12 million at the East Dubuque facility. The company has already spent $1.7 million on Coffeyvile in the first quarter.
Our proven model does not conclusively show that CVR Partners is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for CVR Partners is currently pegged at -14.29%. This is because the Most Accurate Estimate stands at 18 cents while the Zacks Consensus Estimate is pegged at 21 cents.
Zacks Rank: CVR Partners carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
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CVR Partners (UAN) Q2 Earnings: Stock Set to Disappoint?
CVR Partners, LP (UAN - Free Report) is set to release its second-quarter 2016 results ahead of the bell on Jul 28.
Last quarter, the company reported earnings of 25 cents per share, beating the Zacks Consensus Estimate of 21 cents and thereby posting a positive earnings surprise of 19.05%. Net sales of $73.1 million for the quarter also surpassed the Zacks Consensus Estimate, delivering a positive surprise of 29.61%.
However, on a year-over-year basis, the company’s performance suffered, with net sales as well as earnings in first-quarter 2016 witnessing a decline from the year-ago quarter. Net sales and net income fell 21.5% and 39%, year over year, respectively.
Let’s take a look at how things are shaping up for this announcement.
Factors to Consider
CVR Partners, in its first-quarter call, noted a volatile current pricing environment for nitrogen fertilizer, down about 20% year over year. Urea prices have been under pressure due to higher supply from Chinese producers.
Excess inventory has further put pressure on prices of nitrogen fertilizers. The company faces intense pricing competition from other producers, domestic as well as international. Lower cost of natural gas, which is used as primary feedstock by most of the competitors, unfavorably impacts CVR Partners’ position compared to other nitrogen fertilizer makers.
The acquisition of Rentech Nitrogen was completed in the second quarter. The two companies operate similarly and integrate well. Management expects to achieve the previously stated combined synergies of $12 million over time. The company is also looking to increase production at the Coffeyville plant. Management implemented several measures for this purpose which proved to be successful. Ammonia production is expected to further increase in the second half of 2016.
For full-year 2016, CVR Partners expects maintenance capital expenditure in the range of $7−$10 million for Coffeyville and between $10−$12 million at the East Dubuque facility. The company has already spent $1.7 million on Coffeyvile in the first quarter.
CVR PARTNERS LP Price and EPS Surprise
CVR PARTNERS LP Price and EPS Surprise | CVR PARTNERS LP Quote
Earnings Whispers
Our proven model does not conclusively show that CVR Partners is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for CVR Partners is currently pegged at -14.29%. This is because the Most Accurate Estimate stands at 18 cents while the Zacks Consensus Estimate is pegged at 21 cents.
Zacks Rank: CVR Partners carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>