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Why You Should Retain CF Industries (CF) in Your Portfolio
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CF Industries Holdings, Inc. (CF - Free Report) is expected to benefit from healthy nitrogen fertilizer demand in major markets and lower natural gas costs amid headwinds from lower nitrogen prices.
The company’s shares have lost 7.2% over a year compared with the 32.9% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
Healthy Nitrogen Demand Bodes Well
CF Industries is gaining from rising global demand for nitrogen fertilizers, driven by significant agricultural demand. Higher crop commodity prices are contributing to healthy demand globally. Industrial demand has also recovered from the pandemic-related disruptions.
The company expects global nitrogen demand to remain resilient in the near term on the back of continued strong agriculture applications and recovering industrial demand. Low channel inventories and favorable farm economics are expected to drive demand for nitrogen in North America. Demand for urea is also expected to remain strong in Brazil and India. CF expects India to remain a significant importer of urea in 2024.
Moreover, CF Industries is benefiting from a decline in natural gas prices. CF Industries witnessed a significant decline in natural gas costs in the fourth quarter of 2023. Average cost of natural gas fell to $3.01 per MMBtu in the fourth quarter from $6.88 per MMBtu in the year-ago quarter. The same for 2023 declined to $3.67 per MMBtu from $7.18 per MMBtu a year ago. Lower natural gas costs led to a decline in the company's cost of sales. The benefits of reduced gas costs are expected to continue in the first quarter of 2024.
CF Industries also remains committed to boosting shareholders’ value by leveraging strong cash flows. It generated net operating cash flows of $2.76 billion and a free cash flow of $1.8 billion in 2023. During the fourth quarter, the company repurchased 2.9 million shares for $225 million. It repurchased around 7.9 million shares for $580 million during 2023. It also returned roughly $900 million to shareholders through dividends and share buybacks in 2023. The company, earlier this year, also announced a 25% increase in quarterly dividend to 50 cents per share.
Lower Nitrogen Prices Pose Headwinds
CF Industries remains challenged by softer nitrogen prices. Global nitrogen prices have declined since the beginning of 2023. Higher global supply availability driven by higher global operating rates due to lower global energy costs has resulted in a decline in prices. Lower average selling prices weighed on CF's top line in the fourth quarter. Selling prices fell as lower global energy costs led to reduced global market clearing price required to meet global demand. The weak pricing environment is expected to continue over the near term. Lower pricing is likely to continue weighing on the company’s sales and margins.
Better-ranked stocks worth a look in the basic materials space include, Alpha Metallurgical Resources Inc. (AMR - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The Zacks Consensus Estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 8.8% in the past 60 days. AMR delivered a trailing four-quarter earnings surprise of roughly 24.8%, on average. Its shares are up around 108% in a year. AMR currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 30% in the past year. CRS currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 74% in the past year.
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Why You Should Retain CF Industries (CF) in Your Portfolio
CF Industries Holdings, Inc. (CF - Free Report) is expected to benefit from healthy nitrogen fertilizer demand in major markets and lower natural gas costs amid headwinds from lower nitrogen prices.
The company’s shares have lost 7.2% over a year compared with the 32.9% decline of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
Healthy Nitrogen Demand Bodes Well
CF Industries is gaining from rising global demand for nitrogen fertilizers, driven by significant agricultural demand. Higher crop commodity prices are contributing to healthy demand globally. Industrial demand has also recovered from the pandemic-related disruptions.
The company expects global nitrogen demand to remain resilient in the near term on the back of continued strong agriculture applications and recovering industrial demand. Low channel inventories and favorable farm economics are expected to drive demand for nitrogen in North America. Demand for urea is also expected to remain strong in Brazil and India. CF expects India to remain a significant importer of urea in 2024.
Moreover, CF Industries is benefiting from a decline in natural gas prices. CF Industries witnessed a significant decline in natural gas costs in the fourth quarter of 2023. Average cost of natural gas fell to $3.01 per MMBtu in the fourth quarter from $6.88 per MMBtu in the year-ago quarter. The same for 2023 declined to $3.67 per MMBtu from $7.18 per MMBtu a year ago. Lower natural gas costs led to a decline in the company's cost of sales. The benefits of reduced gas costs are expected to continue in the first quarter of 2024.
CF Industries also remains committed to boosting shareholders’ value by leveraging strong cash flows. It generated net operating cash flows of $2.76 billion and a free cash flow of $1.8 billion in 2023. During the fourth quarter, the company repurchased 2.9 million shares for $225 million. It repurchased around 7.9 million shares for $580 million during 2023. It also returned roughly $900 million to shareholders through dividends and share buybacks in 2023. The company, earlier this year, also announced a 25% increase in quarterly dividend to 50 cents per share.
Lower Nitrogen Prices Pose Headwinds
CF Industries remains challenged by softer nitrogen prices. Global nitrogen prices have declined since the beginning of 2023. Higher global supply availability driven by higher global operating rates due to lower global energy costs has resulted in a decline in prices. Lower average selling prices weighed on CF's top line in the fourth quarter. Selling prices fell as lower global energy costs led to reduced global market clearing price required to meet global demand. The weak pricing environment is expected to continue over the near term. Lower pricing is likely to continue weighing on the company’s sales and margins.
CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include, Alpha Metallurgical Resources Inc. (AMR - Free Report) , Carpenter Technology Corporation (CRS - Free Report) and Hawkins, Inc. (HWKN - Free Report) .
The Zacks Consensus Estimate for Alpha Metallurgical Resources’ current-year earnings has been revised upward by 8.8% in the past 60 days. AMR delivered a trailing four-quarter earnings surprise of roughly 24.8%, on average. Its shares are up around 108% in a year. AMR currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Carpenter Technology’s current fiscal year earnings is pegged at $4.00, indicating a year-over-year surge of 250.9%. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 12.2%. The company’s shares have gained around 30% in the past year. CRS currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Hawkins’ current fiscal year earnings is pegged at $3.61 per share, indicating a year-over-year rise of 26.2%. The Zacks Consensus Estimate for HWKN’s current-year earnings has been revised 4.3% upward in the past 30 days. HWKN, a Zacks Rank #2 stock, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 30.6%. The company’s shares have rallied roughly 74% in the past year.