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CF (CF) Up 10.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CF Industries (CF - Free Report) . Shares have added about 10.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

CF Industries' Earnings & Sales Surpass Estimates in Q4

CF Industries reported a profit of $87 million or 40 cents per share in the fourth quarter of 2020 compared with profits of $55 million or 25 cents in the year-ago quarter. Also, earnings per share surpassed the Zacks Consensus Estimate of 8 cents.

Net sales increased 5% year over year to $1,102 million in the quarter. The figure also beat the Zacks Consensus Estimate of $984.2 million.

Per the company, average selling prices in the reported quarter were lower on a year-over-year basis across most segments due to higher global supply availability. But, sales volume in the fourth quarter was higher than the prior-year quarter’s levels owing to greater supply availability.

Segment Review

Net sales in the Ammonia segment increased 12% year over year to $298 million in the reported quarter. In full year 2020, sales volume increased from prior-year’s levels owing to increased supply availability resulting from higher production and beginning inventories in the year. Average selling prices in 2020 declined due to increased global supply availability.

Sales in the Granular Urea segment increased 39.3% year over year to $333 million. Average selling prices for urea declined for the full year due to increased global supply availability, while sales volume increased due to greater supply availability.

Sales in the UAN segment fell 19% year over year to $272 million. Sales volume in 2020 was in-line with prior-year levels, while average selling prices declined due to higher global supply availability.

Sales in the AN segment declined 4.3% year over year to $112 million. In 2020, sales volumes rose year over year but average selling prices declined due to increased global supply availability.

FY20 Results

Earnings (as reported) for full-year 2020 were $1.47 per share compared with earnings of $2.23 per share a year ago. Net sales fell 10.9% year over year to around $4.1 billion.

Financials

CF Industries’ cash and cash equivalents increased 138% year over year to $683 million at the end of 2020. Long-term debt was $3,712 million at the end of the year, down 6.2% year over year.

Cash flow from operations amounted to $290 million in the reported quarter, down 4% year over year.

Outlook

CF Industries expects nitrogen pricing to be positive in 2021 owing to higher commodity crop futures prices as well as energy prices in Asia and Europe. It expects higher canola plantings in Canada to also support nitrogen demand. Moreover, CF Industries projects higher nitrogen demand in North America for industrial uses. Also, the company sees global nitrogen requirements to remain robust this year, which is likely to be driven by strong demand for urea imports from India and Brazil.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 280% due to these changes.

VGM Scores

Currently, CF has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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