CF Industries Holdings, Inc.’s (CF - Free Report) stock looks promising at the moment. The company’s shares have gained roughly 13% over the past three months. It is expected to gain from higher demand for nitrogen fertilizers and lower natural gas costs.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
Let's see what makes this Zacks Rank #1 (Strong Buy) stock a compelling investment option at the moment.
Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for CF Industries for the current year has increased 8.5%. The consensus estimate for 2021 has also been revised 5.9% upward over the same time frame.
Valuation looks attractive as CF Industries’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value fertilizer stocks, CF Industries is currently trading at trailing 12-month EV/EBITDA multiple of 6.57, cheaper than the industry average of 9.34.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 6.8%, above the industry’s level of 3.7%.
Growth Drivers in Place
CF Industries should benefit from higher nitrogen fertilizer demand in major markets. The company expects global nitrogen demand to remain positive in the second half of 2020 and into 2021. Global nitrogen requirements are driven by demand in India and Brazil.
Favorable weather and domestic stimulus are driving urea consumption in India. Demand for urea imports into Brazil also remains favorable, partly supported by improved farm incomes. The company expects total urea imports into Brazil to surpass 6.5 million metric tons in 2020.
Low natural gas costs have also been an advantage for CF Industries. The company is enjoying the benefits of access to low cost and abundant North American natural gas supply. It saw lower year-over-year natural gas costs in the first half of 2020, supporting its margins. The natural gas cost advantage is expected to continue for the remainder of 2020.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited (AEM - Free Report) , Yamana Gold Inc. (AUY - Free Report) and New Gold Inc. (NGD - Free Report) .
Agnico Eagle has a projected earnings growth rate of 91.8% for the current year. The company’s shares have rallied around 42% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 60% in the past year. It currently carries a Zacks Rank #2 (Buy).
New Gold has an expected earnings growth rate of 75% for the current year. The company’s shares have shot up around 90% in the past year. It currently carries a Zacks Rank #2.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>