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CF Industries Holdings, Inc. (CF - Free Report) logged third-quarter 2023 earnings of 85 cents per share, down from $2.18 in the year-ago quarter. The figure missed the Zacks Consensus Estimate of 94 cents.
Net sales fell around 45% year over year to $1,273 million in the quarter, missing the Zacks Consensus Estimate of $1,294.3 million. Sales were hurt by lower average selling prices resulting from increased global supply availability as lower global energy costs led to higher operating rates.
Sales volumes rose year over year in the reported quarter on the back of higher urea ammonium nitrate and ammonia sales volumes, partly masked by lower granular urea sales volumes.
CF Industries Holdings, Inc. Price, Consensus and EPS Surprise
Net sales in the Ammonia segment decreased 56% year over year to $235 million in the reported quarter. It was below our estimate of $324 million. Average selling price per product ton was $308, which was below our estimate of $552. Ammonia adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period due to lower average selling prices, partly offset by lower realized natural gas prices.
Sales in the Granular Urea segment fell around 48% year over year to $360 million. It was higher than our estimate of $255.9 million. Average selling price per product ton was $339, which lagged our estimate of $352. Granular urea adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period mainly due to a decline in average selling prices, partly offset by lower realized natural gas prices.
Sales in the Urea Ammonium Nitrate segment fell around 41% year over year to $435 million. It lagged our estimate of $469 million. Average selling price per product ton was $223, which was below our estimate of $366. Adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period mainly due to reduced average selling prices that more than offset a decline in realized natural gas costs.
Sales in the Ammonium Nitrate segment fell around 37% year over year to $114 million. It was lower than our estimate of $116.7 million. Average selling price per product ton was $275, which was below our estimate of $392. Adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period due to lower average selling prices, partly offset by the impact of using lower-cost imported ammonia for ammonium nitrate production in the U.K. and reduced realized natural gas prices.
Financials
CF Industries ended the third quarter with cash and cash equivalents of $3,254 million, up around 1% from the prior quarter. Long-term debt was $2,967 million at the end of the quarter, flat sequentially.
Net cash provided by operating activities was $618 million in the reported quarter, down around 13% sequentially.
During the third quarter, the company repurchased 1.9 million shares for $150 million.
Outlook
Per the company, the global nitrogen supply-demand balance will continue to be positive owing to robust demand from agricultural and forward energy curves displaying an elevated cost curve. Energy price differences between producers in North America and marginal producers in Europe and Asia continue to be significantly higher than historical levels. These stronger differentials are expected to last for a considerable amount of time, based on forward energy curves. According to the company, there will continue to be considerable margin opportunities for low-cost North American producers on the back of the global nitrogen cost curve. CF also expects demand to remain solid through the end of this year and into 2024, led by India and Brazil.
Price Performance
Shares of CF Industries have declined 24.7% in the past year compared with a 33.9% fall of the industry.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
CF Industries currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include Koppers Holdings Inc. (KOP - Free Report) , WestRock Company (WRK - Free Report) and The Andersons Inc. (ANDE - Free Report) .
Koppers has a trailing four-quarter earnings surprise of roughly 21.7%, on average. KOP shares have surged around 42% in a year.
In the past 60 days, the Zacks Consensus Estimate for WestRock’s current fiscal year has been revised upward by 5.2%. WRK, carrying a Zacks Rank #2, beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 30.7%. The company’s shares have gained 3% in the past year.
Andersons currently carries a Zacks Rank #1. The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 3.3% upward over the past 60 days.
Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. ANDE shares have rallied around 42% in a year.
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CF Industries' (CF) Q3 Earnings Miss, Lower Prices Hurt Sales
CF Industries Holdings, Inc. (CF - Free Report) logged third-quarter 2023 earnings of 85 cents per share, down from $2.18 in the year-ago quarter. The figure missed the Zacks Consensus Estimate of 94 cents.
Net sales fell around 45% year over year to $1,273 million in the quarter, missing the Zacks Consensus Estimate of $1,294.3 million. Sales were hurt by lower average selling prices resulting from increased global supply availability as lower global energy costs led to higher operating rates.
Sales volumes rose year over year in the reported quarter on the back of higher urea ammonium nitrate and ammonia sales volumes, partly masked by lower granular urea sales volumes.
CF Industries Holdings, Inc. Price, Consensus and EPS Surprise
CF Industries Holdings, Inc. price-consensus-eps-surprise-chart | CF Industries Holdings, Inc. Quote
Segment Review
Net sales in the Ammonia segment decreased 56% year over year to $235 million in the reported quarter. It was below our estimate of $324 million. Average selling price per product ton was $308, which was below our estimate of $552. Ammonia adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period due to lower average selling prices, partly offset by lower realized natural gas prices.
Sales in the Granular Urea segment fell around 48% year over year to $360 million. It was higher than our estimate of $255.9 million. Average selling price per product ton was $339, which lagged our estimate of $352. Granular urea adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period mainly due to a decline in average selling prices, partly offset by lower realized natural gas prices.
Sales in the Urea Ammonium Nitrate segment fell around 41% year over year to $435 million. It lagged our estimate of $469 million. Average selling price per product ton was $223, which was below our estimate of $366. Adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period mainly due to reduced average selling prices that more than offset a decline in realized natural gas costs.
Sales in the Ammonium Nitrate segment fell around 37% year over year to $114 million. It was lower than our estimate of $116.7 million. Average selling price per product ton was $275, which was below our estimate of $392. Adjusted gross margin per ton decreased for the first nine months of 2023 from the year-ago period due to lower average selling prices, partly offset by the impact of using lower-cost imported ammonia for ammonium nitrate production in the U.K. and reduced realized natural gas prices.
Financials
CF Industries ended the third quarter with cash and cash equivalents of $3,254 million, up around 1% from the prior quarter. Long-term debt was $2,967 million at the end of the quarter, flat sequentially.
Net cash provided by operating activities was $618 million in the reported quarter, down around 13% sequentially.
During the third quarter, the company repurchased 1.9 million shares for $150 million.
Outlook
Per the company, the global nitrogen supply-demand balance will continue to be positive owing to robust demand from agricultural and forward energy curves displaying an elevated cost curve. Energy price differences between producers in North America and marginal producers in Europe and Asia continue to be significantly higher than historical levels. These stronger differentials are expected to last for a considerable amount of time, based on forward energy curves. According to the company, there will continue to be considerable margin opportunities for low-cost North American producers on the back of the global nitrogen cost curve. CF also expects demand to remain solid through the end of this year and into 2024, led by India and Brazil.
Price Performance
Shares of CF Industries have declined 24.7% in the past year compared with a 33.9% fall of the industry.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
CF Industries currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include Koppers Holdings Inc. (KOP - Free Report) , WestRock Company (WRK - Free Report) and The Andersons Inc. (ANDE - Free Report) .
Koppers has a projected earnings growth rate of 7.5% for the current year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Koppers has a trailing four-quarter earnings surprise of roughly 21.7%, on average. KOP shares have surged around 42% in a year.
In the past 60 days, the Zacks Consensus Estimate for WestRock’s current fiscal year has been revised upward by 5.2%. WRK, carrying a Zacks Rank #2, beat the Zacks Consensus Estimate in three of the last four quarters while missing in one quarter, with the average earnings surprise being 30.7%. The company’s shares have gained 3% in the past year.
Andersons currently carries a Zacks Rank #1. The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 3.3% upward over the past 60 days.
Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. ANDE shares have rallied around 42% in a year.