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CF (CF) Up 5.5% 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 5.5% 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 its most recent earnings report in order to get a better handle on the important catalysts.

CF Industries' Q1 Earnings Beat Estimates, Sales Lag

CF Industries reported a profit of $151 million or 70 cents per share in the first quarter of 2021 compared with profits of $68 million or 31 cents in the year-ago quarter. Also, earnings per share surpassed the Zacks Consensus Estimate of 57 cents.

Net sales increased 8% year over year to $1,048 million in the quarter. However, the figure missed the Zacks Consensus Estimate of $1,095.3 million.

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

Segment Review

Net sales in the Ammonia segment increased 6.7% year over year to $206 million in the reported quarter. In the first quarter, sales volume declined from the prior-year quarter’s levels owing to lower supply availability stemming from reduced production. Average selling prices in the first quarter increased year over year due to lower global supply availability.

Sales in the Granular Urea segment increased 18.4% year over year to $399 million. Average selling prices for urea increased in the first quarter due to lower global supply availability, while sales volume fell due to lower supply availability.

Sales in the UAN segment inched down 1% year over year to $232 million. Sales volume in the first quarter increased from the prior-year quarter’s levels owing to higher supply availability from increased production. Average selling prices declined due to higher global supply availability.

Sales in the AN segment declined 9.5% year over year to $105 million. In the first quarter, sales volumes fell year over year due to lower supply availability. Average selling prices increased due to lower global supply availability.

Financials

CF Industries’ cash and cash equivalents increased 6.7% year over year to $804 million at the end of first quarter. Long-term debt was $3,713 million at the end of the quarter, down 6.2% year over year.

Cash flow from operations amounted to $578 million in the reported quarter, up 98% year over year.

Outlook

CF Industries expects nitrogen pricing to be positive in 2021 as global nitrogen supply and demand balance has been significantly tightened by low global coarse grains stocks-to-use ratios as well as higher energy prices in Asia and Europe. The company projects around 90-92 million planted corn acres in the United States in 2021. It also expects higher canola plantings in Canada to support nitrogen demand. Moreover, CF Industries projects higher nitrogen demand in North America for industrial uses. The company anticipates nitrogen requirements in other regions to remain strong 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 34.68% due to these changes.

VGM Scores

Currently, CF has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. It comes with little surprise CF has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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