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CF Industries is a global manufacturer and distributor of nitrogen fertilizer. The company manufactures and sells hydrogen and nitrogen products for fertilizer, energy, emissions abatement, and other industrial activities.
Its principal products include anhydrous ammonia, granular urea, and ammonium nitrate. The company primarily serves cooperatives, independent fertilizer distributors, wholesalers, and industrial users. CF Industries was founded in 1946 and is headquartered in Northbrook, IL.
The Zacks Rundown
CF Industries (CF - Free Report) , a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fertilizers industry group, which currently ranks in the bottom 22% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months – just as it has year-to-date:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other fertilizer stocks, CF stock experienced a climax top in 2022 amid the peak in inflation and has been in a price downtrend ever since. The stock is hitting a series of lower lows and represents a compelling short opportunity as we move into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
CF Industries has fallen short of earnings estimates in three of the past four quarters. Back in May, the company reported first-quarter earnings of $1.03/share, missing the $1.47/share Zacks Consensus estimate by -29.93%.
CF Industries has posted an average earnings miss of -4.6% over the last four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and CF is no exception.
The fertilizer company has been on the receiving end of negative earnings estimate revisions as of late. For the most recent quarter, analysts have decreased estimates by -2.08% in the past 60 days. The Q2 Zacks Consensus Estimate is now $1.88/share, reflecting negative growth of -30.37% relative to the year-ago period.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
The company faces headwinds from lower nitrogen prices. Higher global supply availability, driven by higher global operating rates, has resulted in a decline in prices. The weak pricing environment is expected to continue, dampening company sales and margins.
Technical Outlook
As illustrated below, CF stock is in a sustained downtrend. Notice how the stock has plunged below both the 50-day (blue line) and 200-day moving averages (red line). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages are sloping down – another good sign for the bears.
Image Source: StockCharts
While not the most accurate indicator, CF has also experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. CF Industries would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 10% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make new highs anytime soon. The fact that CF Industries is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of CF until the situation shows major signs of improvement.
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Bear of the Day: CF Industries (CF)
CF Industries is a global manufacturer and distributor of nitrogen fertilizer. The company manufactures and sells hydrogen and nitrogen products for fertilizer, energy, emissions abatement, and other industrial activities.
Its principal products include anhydrous ammonia, granular urea, and ammonium nitrate. The company primarily serves cooperatives, independent fertilizer distributors, wholesalers, and industrial users. CF Industries was founded in 1946 and is headquartered in Northbrook, IL.
The Zacks Rundown
CF Industries (CF - Free Report) , a Zacks Rank #5 (Strong Sell), is a component of the Zacks Fertilizers industry group, which currently ranks in the bottom 22% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months – just as it has year-to-date:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be solid potential short candidates. While individual stocks have the ability to outperform even when included in a lackluster industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other fertilizer stocks, CF stock experienced a climax top in 2022 amid the peak in inflation and has been in a price downtrend ever since. The stock is hitting a series of lower lows and represents a compelling short opportunity as we move into the latter half of the year.
Recent Earnings Misses & Deteriorating Outlook
CF Industries has fallen short of earnings estimates in three of the past four quarters. Back in May, the company reported first-quarter earnings of $1.03/share, missing the $1.47/share Zacks Consensus estimate by -29.93%.
CF Industries has posted an average earnings miss of -4.6% over the last four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and CF is no exception.
The fertilizer company has been on the receiving end of negative earnings estimate revisions as of late. For the most recent quarter, analysts have decreased estimates by -2.08% in the past 60 days. The Q2 Zacks Consensus Estimate is now $1.88/share, reflecting negative growth of -30.37% relative to the year-ago period.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
The company faces headwinds from lower nitrogen prices. Higher global supply availability, driven by higher global operating rates, has resulted in a decline in prices. The weak pricing environment is expected to continue, dampening company sales and margins.
Technical Outlook
As illustrated below, CF stock is in a sustained downtrend. Notice how the stock has plunged below both the 50-day (blue line) and 200-day moving averages (red line). The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages are sloping down – another good sign for the bears.
Image Source: StockCharts
While not the most accurate indicator, CF has also experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. CF Industries would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. The stock has fallen more than 10% this year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to make new highs anytime soon. The fact that CF Industries is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses and falling future earnings estimates will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
Potential investors may want to give this stock the cold shoulder, or perhaps include it as part of a short or hedge strategy. Bulls will want to steer clear of CF until the situation shows major signs of improvement.