Global surpluses in your core competency dampens growth levels, and puts pressure on a company’s pricing power as well. This is the situation facing our Zacks Bear of the Day, CF Industries (CF - Free Report) who is dealing with global nitrogen supply surpluses due high stockpiles of the commodity in China, India, and Pakistan. Further, this supply glut is not expected to be reduced as a wetter and colder than expected spring has delayed ammonia applications in the Midwest United States.
This Zacks Ranked #5 (Strong Sell) is the holding company for the operations of CF Industries, Inc. CF Industries, Inc. is a major producer and distributor of nitrogen and phosphate fertilizer products. CF Industries operates world-scale nitrogen fertilizer plants in Louisiana and Alberta, Canada; conducts phosphate mining and manufacturing operations in Central Florida; and distributes fertilizer products through a system of terminals, warehouses, and associated transportation equipment located primarily in the Midwestern United States.
Recent Earnings Data
In early May, CF announced Q1 17 earnings where they missed the Zacks consensus earnings estimate, but beat the Zacks consensus revenue estimate. On a year over year basis, the company saw several negative trends; cost of sales increased by +18.3%, gross margins fell -11.4%, Net earnings declined from +$26 million to a net loss of $23 million, and adjusted net earnings per diluted share diminished from $0.43 to $0.05.
Price and Earnings Consensus Graph
Due to the lack of pricing power, and increased cost of sales, the stock price and future earnings estimates have been declining for quite some time.