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CF Industries (CF) Q3 Earnings: Will the Stock Disappoint?
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CF Industries (CF - Free Report) is set to release its third-quarter 2016 results after the bell on Nov 2.
Last quarter, the fertilizer maker had delivered a negative earnings surprise of 51.47%. The company’s profits tumbled roughly 87% in the quarter, hurt by lower selling prices. Revenues fell by double digits on reduced average selling prices across all segments, but beat expectations.
CF Industries missed the Zacks Consensus Estimate in all of the trailing 4 quarters with an average negative surprise of 29.61%. Let’s see how things are shaping up for this announcement.
Factors to Consider
While CF Industries remains on track with its capacity expansion projects and should gain from healthy demand for nitrogen, it continues to see pricing pressure in its nitrogen business.
Depressed global energy prices and excess capacity have contributed to a softer nitrogen pricing environment. Global capacity expansion continues to exert pressure on urea and other nitrogen fertilizer prices.
Abundant nitrogen supply driven by new production capacity is expected to weigh on global prices through the second half of 2016. CF Industries expects the challenging pricing environment to sustain through 2017. Additional urea and urea ammonium nitrate (“UAN”) production capacity is slated to come on stream in North America in the first or second quarter of 2017.
The broader fertilizer industry remains hamstrung by a slew of headwinds including low prices of nutrients and depressed farm income. The prevailing softness in agricultural commodity pricing remains a concern for fertilizer companies as it is hindering fertilizer use by farmers given the adverse effect of lower crop pricing on growers’ income.
As such, a difficult pricing environment is expected to continue to weigh on the company’s sales and profits in the September quarter.
Our proven model does not conclusively show that CF Industries 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 CF Industries is currently pegged at -80.00%. This is because the Most Accurate Estimate stands at a penny per share while the Zacks Consensus Estimate is pegged at 5 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: CF Industries carries a Zacks Rank #5 (Strong 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 stocks in the basic materials space that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
LyondellBasell Industries N.V. (LYB - Free Report) holds a Zacks Rank #2 and an Earnings ESP of +0.87%.
International Flavors & Fragrances Inc. (IFF - Free Report) has an Earnings ESP of +1.42% and carries a Zacks Rank #2.
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CF Industries (CF) Q3 Earnings: Will the Stock Disappoint?
CF Industries (CF - Free Report) is set to release its third-quarter 2016 results after the bell on Nov 2.
Last quarter, the fertilizer maker had delivered a negative earnings surprise of 51.47%. The company’s profits tumbled roughly 87% in the quarter, hurt by lower selling prices. Revenues fell by double digits on reduced average selling prices across all segments, but beat expectations.
CF Industries missed the Zacks Consensus Estimate in all of the trailing 4 quarters with an average negative surprise of 29.61%. Let’s see how things are shaping up for this announcement.
Factors to Consider
While CF Industries remains on track with its capacity expansion projects and should gain from healthy demand for nitrogen, it continues to see pricing pressure in its nitrogen business.
Depressed global energy prices and excess capacity have contributed to a softer nitrogen pricing environment. Global capacity expansion continues to exert pressure on urea and other nitrogen fertilizer prices.
Abundant nitrogen supply driven by new production capacity is expected to weigh on global prices through the second half of 2016. CF Industries expects the challenging pricing environment to sustain through 2017. Additional urea and urea ammonium nitrate (“UAN”) production capacity is slated to come on stream in North America in the first or second quarter of 2017.
The broader fertilizer industry remains hamstrung by a slew of headwinds including low prices of nutrients and depressed farm income. The prevailing softness in agricultural commodity pricing remains a concern for fertilizer companies as it is hindering fertilizer use by farmers given the adverse effect of lower crop pricing on growers’ income.
As such, a difficult pricing environment is expected to continue to weigh on the company’s sales and profits in the September quarter.
CF INDUS HLDGS Price and EPS Surprise
CF INDUS HLDGS Price and EPS Surprise | CF INDUS HLDGS Quote
Earnings Whispers
Our proven model does not conclusively show that CF Industries 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 CF Industries is currently pegged at -80.00%. This is because the Most Accurate Estimate stands at a penny per share while the Zacks Consensus Estimate is pegged at 5 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: CF Industries carries a Zacks Rank #5 (Strong 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 stocks in the basic materials space that you may want to consider, as our model shows they 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
LyondellBasell Industries N.V. (LYB - Free Report) holds a Zacks Rank #2 and an Earnings ESP of +0.87%.
International Flavors & Fragrances Inc. (IFF - Free Report) has an Earnings ESP of +1.42% and carries 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>>