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CF (CF) Down 3.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CF Industries (CF - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CF due for a breakout? 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' Earnings and Sales Miss Estimates in Q2

CF Industries reported a profit of $246 million or $1.14 per share in the second quarter of 2021, up from a profit of $190 million or 89 cents in the year-ago quarter. Earnings per share, however, missed the Zacks Consensus Estimate of $1.64.

Net sales increased around 32% year over year to $1,588 million in the quarter. However, the figure lagged the Zacks Consensus Estimate of $1,718.7 million.
 
Average selling prices in the reported quarter were higher on a year-over-year basis across all segments due to lower global supply availability and strong demand. But sales volume in the second quarter was lower than the prior-year quarter’s levels due to lower supply availability stemming from reduced production.

Segment Review

Net sales in the Ammonia segment went up roughly 26% year over year to $459 million in the reported quarter. Sales volume declined owing to lower supply availability on reduced production. Average selling prices increased year over year due to lower global supply availability and demand strength.

Sales in the Granular Urea segment increased around 32% year over year to $433 million. Average selling prices for urea increased due to strong demand and lower global supply availability, while sales volume fell due to lower supply availability.

Sales in the UAN segment rose 41% year over year to $434 million. Sales volume increased owing to due to inventory draw-down. Average selling prices rose due to lower global supply availability and higher demand.

Sales in the AN segment increased around 15% year over year to $136 million. Sales volumes fell year over year due to lower supply availability. Average selling prices increased due to strong demand and lower global supply availability.

Financials

CF Industries’ cash and cash equivalents increased around 38% year over year to $777 million at the end of the quarter. Long-term debt was $3,713 million at the end of the quarter, down around 6% year over year.

Cash flow from operations amounted to $128 million in the reported quarter, down around 70% year over year.

Outlook

CF Industries expects nitrogen pricing to be positive as higher economic activities, the need to replenish coarse grains stocks globally and increased energy prices in Europe and Asia is expected to sustain a tighter global nitrogen supply and demand balance into 2023.

The global demand for nitrogen is also strong, the company noted. It expects strong global demand for coarse grains to contribute to sustained low global stocks into 2022, supporting strong nitrogen demand in upcoming years. Higher economic activities have also contributed to higher industrial consumption of nitrogen products.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 23.74% 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. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

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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