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Why Should You Dump CF Industries (CF) from Your Portfolio? (revised)

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CF Industries Holdings, Inc. (CF - Free Report) has been disappointing investors of late, given that the shares of this nitrogenous fertilizer manufacturer and distributor have recorded a negative return of 9.7% year-to-date. Moreover, the company has a long term estimated earnings growth rate of -1.23%.

Should investors dump this stock from their portfolio? Let’s find out.   

Estimates Moving South

Estimates for the company for second-quarter 2017, fiscal 2017 and fiscal 2018, have moved south in the past 30 days, reflecting the negative outlook of analysts. For the second quarter, estimate has plunged 82.6% from 23 cents to 4 cents per share in the past 30 days.

For fiscal 2017, the estimate has dropped from earnings of 25 cents to a loss of 23 cents. For fiscal 2018, the estimate has declined 42.2% to 52 cents per share.

Negative Earnings Surprise History

CF Industries missed the Zacks Consensus Estimate in the last reported quarter, recording a negative surprise of 44.4%. In the trailing four quarters, the company posted an average negative earnings surprise of 121.5%.

Disappointing Q1

CF Industries posted a loss of $23 million or 10 cents per share in first-quarter 2017, as against a profit of $26 million or 11 cents recorded a year ago. Barring one-time items, adjusted earnings came in at 5 cents per share for the quarter, compared with the year-ago figure of 43 cents. Earnings missed the Zacks Consensus Estimate of 9 cents.

Price Performance

CF Industries’ stock has lost around 1.8% in the past one year, underperforming the Zacks categorized Fertilizerssub-industry’s 2% gain.



Persistent Headwinds

CF Industries continues to bear the brunt of pricing pressure. Urea prices have been under pressure due to higher nitrogen supply. High supply levels in the global nitrogen market due to capacity additions pressured pricing in the last reported quarter.

Unfavorable Zacks Rank & Score

CF Industries currently carries a Zacks Rank #5 (Strong Sell) and a VGM score of “F”. Here 'V' stands for Value, 'G' for Growth and 'M' for Momentum. CF Industries’ score is a weighted combination of these three scores (Value - B, Growth - A, Momentum - B). Such a score allows investors to eliminate the negative aspects of stocks and select winners.

Key Picks
    
Some better-ranked stocks in the basic materials space include Kronos Worldwide Inc. (KRO - Free Report) , ArcelorMittal (MT - Free Report) and The Chemours Company (CC - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Kronos has an expected long-term earnings growth of 5%.

ArcelorMittal has an expected long-term earnings growth of 11.4%.

Chemours Company has an expected long-term earnings growth of 15.5%.

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