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CF Industries' (CF) Earnings & Sales Beat Estimates in Q2

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CF Industries Holdings, Inc. (CF - Free Report) delivered profits of $190 million or 89 cents per share in the second quarter of 2020, down from $283 million or $1.28 per share in the year-ago quarter. Nevertheless, earnings per share beat the Zacks Consensus Estimate of 54 cents.

Net sales fell 19.8% year over year to $1,204 million in the quarter. However, the figure beat the Zacks Consensus Estimate of $1,144.7 million.

Segment Review

Net sales in the Ammonia segment fell 23% year over year to $364 million in the reported quarter. The company saw lower year over year sales volumes in the reported quarter. Average selling prices of ammonia fell year over year in the quarter, impacted by higher global supply.  

Sales in the Granular Urea segment declined 24% year over year to $329 million. Average selling prices for urea declined due to increased global supply availability.  

Sales in the UAN segment fell 8.2% year over year to $308 million. Sales volumes declined year over year, while average selling prices declined in the quarter due to higher global supply availability.

Sales in the AN segment declined 6.3% year over year to $118 million. Sales volumes rose year over year on the back of higher demand in Europe for agricultural applications. Average selling prices declined year over year due to increased global supply availability.

Financials

CF Industries’ cash and cash equivalents fell 34.4% year over year to $563 million in the second quarter. Long-term debt was $3,959 million at the end of the quarter, down 5.8% year over year.

Cash flow from operations amounted to $426 million in the reported quarter, up 10.1% year over year. The company did not repurchase shares during the second quarter. Since share repurchase authorization announced in February 2019, the company has around $560 million remaining under the program.

Outlook

CF Industries expects global nitrogen demand to remain positive into 2021. Further, global nitrogen requirements are driven by demand in India and Brazil. Demand for urea imports into Brazil remains positive. This is partly supported by improved farm incomes. The company expects total urea imports into Brazil to surpass 6.5 million metric tons in 2020.

Per the company, low global energy prices are boosting global nitrogen supply. However, lower global nitrogen prices led to the shutdown of three ammonia plants in Trinidad. North American nitrogen production facilities are expected to benefit from access to low-cost North American natural gas. In the long term, the company expects global demand growth for nitrogen to outpace net capacity additions.

Price Performance

Shares of CF Industries have lost 34.8% in the past year compared with the industry’s 21.1% decline.

Zacks Rank & Key Picks

CF Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Alamos Gold Inc. (AGI - Free Report) , Gold Fields Limited (GFI - Free Report) and Northern Dynasty Minerals Ltd. (NAK - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Alamos Gold has an expected earnings growth rate of 75% for 2020. The company’s shares have surged 49.3% in the past year.

Gold Fields has an expected earnings growth rate of 35.7% for 2020. Its shares have returned 128% in the past year.

Northern Dynasty has an expected earnings growth rate of 35.7% for 2020. The company’s shares have gained 88.2% in the past year.

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