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What's in Store for CVR Partners (UAN) in Q3 Earnings?
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CVR Partners, LP (UAN - Free Report) is set to release its third-quarter 2016 results ahead of the bell on Oct 27.
Last quarter, the company reported earnings of a penny per share, widely missing the Zacks Consensus Estimate of 21 cents, resulting in a negative earnings surprise of 95.24%. However, net sales of $119.8 million for the quarter surpassed the Zacks Consensus Estimate of $109 million.
On a year-over-year basis, the company’s net sales improved in second-quarter 2016 while earnings declined. Net sales were up around 48.3% while net income fell 19.4%.
Let’s take a look at how things are shaping up for this announcement.
Factors to Consider
CVR Partners is expected to gain from its acquisition of Rentech Nitrogen. The company’s second-quarter 2016 results included operations at the East Dubuque facility, which was acquired with the purchase of Rentech Nitrogen completed in that quarter. The two companies operate similarly and integrate well. Management continues to expect to achieve the previously stated combined synergies of $12 million over time. The company also saw a high operating rate at the Coffeyville plant. Ammonia production is expected to further increase in the second half of 2016, by around 75 tons per day by CVR Partners and roughly 50 tons per day by Rentech Nitrogen.
However, CVR Partners is exposed to pricing pressures due to lower nitrogen fertilizer prices. The company is seeing lower prices for urea ammonium nitrate (“UAN”), as witnessed by a roughly 26% decline in the second quarter. Urea prices have also been under pressure due to high levels of supply from Chinese producers. Ammonia prices fell roughly 24% in the second quarter.
Global capacity expansion continues to create headwinds for urea and other nitrogen fertilizer prices. Nitrogen prices are expected to remain under pressure in the second half of 2016 due to increased supply. As such, depressed nitrogen fertilizer prices may weigh on CVR Partners’ margins in the short term. Additionally, the company faces pricing competition from other nitrogen fertilizer producers.
For 2016, CVR Partners expects total maintenance capital expenditure of roughly $19 million, for the full year at the Coffeyville plant and nine months at East Dubuque. For the third quarter of 2016, the company expects to spend $3−$5 million for the final payments related to the installation of the new ammonia synthesis converter at East Dubuque.
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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at a loss of 9 cents.
Zacks Rank: CVR Partners carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Chemours Company (CC - Free Report) has an Earnings ESP of +25.71% and a Zacks Rank #1.
Cabot Corporation (CBT - Free Report) has an Earnings ESP of +7.45% and a Zacks Rank #2.
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What's in Store for CVR Partners (UAN) in Q3 Earnings?
CVR Partners, LP (UAN - Free Report) is set to release its third-quarter 2016 results ahead of the bell on Oct 27.
Last quarter, the company reported earnings of a penny per share, widely missing the Zacks Consensus Estimate of 21 cents, resulting in a negative earnings surprise of 95.24%. However, net sales of $119.8 million for the quarter surpassed the Zacks Consensus Estimate of $109 million.
On a year-over-year basis, the company’s net sales improved in second-quarter 2016 while earnings declined. Net sales were up around 48.3% while net income fell 19.4%.
Let’s take a look at how things are shaping up for this announcement.
Factors to Consider
CVR Partners is expected to gain from its acquisition of Rentech Nitrogen. The company’s second-quarter 2016 results included operations at the East Dubuque facility, which was acquired with the purchase of Rentech Nitrogen completed in that quarter. The two companies operate similarly and integrate well. Management continues to expect to achieve the previously stated combined synergies of $12 million over time. The company also saw a high operating rate at the Coffeyville plant. Ammonia production is expected to further increase in the second half of 2016, by around 75 tons per day by CVR Partners and roughly 50 tons per day by Rentech Nitrogen.
However, CVR Partners is exposed to pricing pressures due to lower nitrogen fertilizer prices. The company is seeing lower prices for urea ammonium nitrate (“UAN”), as witnessed by a roughly 26% decline in the second quarter. Urea prices have also been under pressure due to high levels of supply from Chinese producers. Ammonia prices fell roughly 24% in the second quarter.
Global capacity expansion continues to create headwinds for urea and other nitrogen fertilizer prices. Nitrogen prices are expected to remain under pressure in the second half of 2016 due to increased supply. As such, depressed nitrogen fertilizer prices may weigh on CVR Partners’ margins in the short term. Additionally, the company faces pricing competition from other nitrogen fertilizer producers.
For 2016, CVR Partners expects total maintenance capital expenditure of roughly $19 million, for the full year at the Coffeyville plant and nine months at East Dubuque. For the third quarter of 2016, the company expects to spend $3−$5 million for the final payments related to the installation of the new ammonia synthesis converter at East Dubuque.
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 (Strong Buy), 2 (Buy) or 3 (Hold) 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 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at a loss of 9 cents.
Zacks Rank: CVR Partners carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
CVR PARTNERS LP Price and EPS Surprise
CVR PARTNERS LP Price and EPS Surprise | CVR PARTNERS LP Quote
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Chemours Company (CC - Free Report) has an Earnings ESP of +25.71% and a Zacks Rank #1.
Koppers Holdings Inc. (KOP - Free Report) has an Earnings ESP of +18.18% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabot Corporation (CBT - Free Report) has an Earnings ESP of +7.45% and a Zacks Rank #2.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>