A month has gone by since the last earnings report for CF Industries (
CF Quick Quote CF - Free Report) . Shares have lost about 14.4% 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 drivers.
CF Industries' Q4 Earnings Beat, Sales Lag Estimates
CF Industries recorded earnings of $4.35 per share in the fourth quarter of 2022, reflecting a rise of 33% from the year-ago quarter's $3.27. It surpassed the Zacks Consensus Estimate of $4.13.
The company’s net sales in the fourth quarter were $2,608 million, which lagged the Zacks Consensus Estimate of $2,814.2 million. Net sales increased 2.7% from $2,540 million reported in the prior-year quarter. The rise in top line was mainly attributable to an increase in prices across the company’s most segments due to disruption in the global supply chain of fertilizers, resulting from higher global energy costs, reduced operating rates globally and geopolitical factors. Segment Highlights
Net sales in the Ammonia segment increased 3.3% year over year to $804 million in the reported quarter. Sales volume declined from the prior year’s levels in 2022. Average selling prices increased year over year on lower supply availability, lower operating rates and higher energy costs.
Sales in the Granular Urea segment declined 8.6% year over year to $605 million. Both average selling prices and sales volume increased in 2022. Sales volume climbed due to higher supply availability resulting from higher production, whereas the increase in selling prices was aided by lower supply availability, lower operating rates and higher energy costs. Sales in the UAN segment climbed 15.4% year over year to $845 million. Both average selling prices and sales volume rose in 2022. Sales in the AN segment rose 25.2% year over year to $189 million. Sales volumes were down year over year in 2022, while average selling prices increased on reduced supply. FY22 Results
Earnings for full-year 2022 were $16.38 per share compared with $4.24 a year ago. Net sales climbed 71% to $11,186 million.
CF Industries’ cash and cash equivalents increased 43% year over year to $2,323 million at the end of the year. Long-term debt was $2,965 million at the end of the year, down around 14%.
Net cash provided by operating activities was $3,855 million in the year, up roughly 34.2% year over year. Outlook
Moving ahead, CF industries expects global nitrogen prices to gain support from abundant agricultural demand. The company also expects the global nitrogen supply-demand balance to remain tight into 2025, supported by agricultural-led demand and persistently high energy prices in Europe and Asia. Demand for nitrogen continues to be driven by the need to replenish global grains stocks, per the company. CF industries believes that it will take at least two years for harvests to fully replenish global grain stocks, which will support strong grain plantings aiding nitrogen applications further.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -24.66% due to these changes.
At this time, CF has a great Growth Score of A, though it is lagging a lot 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CF has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.