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CF Industries Stock Rises 21% in 3 Months: What's Driving the Rally?
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Key Takeaways
CF stock surged 20.8% in 3 months, outperforming the fertilizer industry.
Strong nitrogen demand and rising prices are fueling CF's top-line growth.
CF repurchased $434M in shares in Q1 and approved a new $2B buyback program through 2029.
CF Industries Holdings, Inc.’s (CF - Free Report) shares have gained 20.8% over the past three months. The company has also outperformed the Zacks Fertilizers industry’s 19.2% rise over the same time frame. CF has also topped the S&P 500’s roughly 4% increase over the same period.
Image Source: Zacks Investment Research
Let’s take a look at the factors that are driving this fertilizer maker.
CF Stock Gains on Robust Nitrogen Demand and Price Upside
CF Industries benefits from the increasing global demand for nitrogen fertilizers, which is fueled by strong agricultural demand. Industrial demand for nitrogen has also recovered following the pandemic-related disruptions. Global demand is likely to remain high in the foreseeable future as industrial demand recovers and agricultural economics improve. High corn planted acres and low nitrogen channel stockpiles are expected to drive nitrogen demand in North America. Demand for urea is also expected to continue to be strong in Brazil as corn acres increase. Demand in India is likely to be fueled by low inventories.
On its first-quarter earnings call, CF predicted that the global supply-demand balance will stay positive in the short term due to expected high demand from the global corn stocks-to-use ratio hitting its lowest level since 2013, as well as tough production economics in Europe.
In North America, CF Industries anticipates significant nitrogen demand during the spring application season due to corn's greater returns than soybeans, resulting in higher year-over-year planted corn acres in 2025. Nitrogen imports to Brazil are expected to remain high in 2025 due to increased corn plantings and continued low domestic nitrogen output. Urea inventory in India is likely to be low due to increasing domestic demand, resulting in urea imports this year to meet farmer demand and refill stocks.
CF remains focused on increasing shareholder value by leveraging robust cash flows. The net cash generated through operating activities was $586 million in the first quarter, increasing approximately 32% year over year. CF Industries repurchased 5.4 million shares for $434 million during the period. The current $3 billion share repurchase program had approximately $630 million remaining at the end of the first quarter. The company's board of directors approved a fresh $2 billion share repurchase program that will be effective through 2029.
Higher nitrogen prices are also boosting the company's revenues. Its net sales increased around 13% year over year to $1,663 million in the first quarter. The average selling prices for the majority of CF's principal products increased year over year in the quarter, as rising global energy costs boosted the global market-clearing price required to meet global demand. The company is likely to benefit further from rising prices moving ahead.
Better-ranked stocks in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Alamos Gold Inc. (AGI - Free Report) and Hawkins, Inc. (HWKN - Free Report)
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 11.1%. The company's shares have soared 139.2% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alamos Gold current-year earnings is pegged at $1.24 per share. AGI, carrying a Zacks Rank #1, surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while missing twice, with an average earnings surprise of 1.4%. The company's shares have rallied 65.1% in the past year.
Hawkins, which currently carries a Zacks Rank #2, beat the consensus estimate in one of the trailing four quarters, while missing thrice. In this time frame, it has delivered an earnings surprise of roughly 8.2%, on average. The company's shares have rallied 54.6% in the past year.
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CF Industries Stock Rises 21% in 3 Months: What's Driving the Rally?
Key Takeaways
CF Industries Holdings, Inc.’s (CF - Free Report) shares have gained 20.8% over the past three months. The company has also outperformed the Zacks Fertilizers industry’s 19.2% rise over the same time frame. CF has also topped the S&P 500’s roughly 4% increase over the same period.
Image Source: Zacks Investment Research
Let’s take a look at the factors that are driving this fertilizer maker.
CF Stock Gains on Robust Nitrogen Demand and Price Upside
CF Industries benefits from the increasing global demand for nitrogen fertilizers, which is fueled by strong agricultural demand. Industrial demand for nitrogen has also recovered following the pandemic-related disruptions. Global demand is likely to remain high in the foreseeable future as industrial demand recovers and agricultural economics improve. High corn planted acres and low nitrogen channel stockpiles are expected to drive nitrogen demand in North America. Demand for urea is also expected to continue to be strong in Brazil as corn acres increase. Demand in India is likely to be fueled by low inventories.
On its first-quarter earnings call, CF predicted that the global supply-demand balance will stay positive in the short term due to expected high demand from the global corn stocks-to-use ratio hitting its lowest level since 2013, as well as tough production economics in Europe.
In North America, CF Industries anticipates significant nitrogen demand during the spring application season due to corn's greater returns than soybeans, resulting in higher year-over-year planted corn acres in 2025. Nitrogen imports to Brazil are expected to remain high in 2025 due to increased corn plantings and continued low domestic nitrogen output. Urea inventory in India is likely to be low due to increasing domestic demand, resulting in urea imports this year to meet farmer demand and refill stocks.
CF remains focused on increasing shareholder value by leveraging robust cash flows. The net cash generated through operating activities was $586 million in the first quarter, increasing approximately 32% year over year. CF Industries repurchased 5.4 million shares for $434 million during the period. The current $3 billion share repurchase program had approximately $630 million remaining at the end of the first quarter. The company's board of directors approved a fresh $2 billion share repurchase program that will be effective through 2029.
Higher nitrogen prices are also boosting the company's revenues. Its net sales increased around 13% year over year to $1,663 million in the first quarter. The average selling prices for the majority of CF's principal products increased year over year in the quarter, as rising global energy costs boosted the global market-clearing price required to meet global demand. The company is likely to benefit further from rising prices moving ahead.
CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote
CF’s Rank & Key Picks
CF currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Alamos Gold Inc. (AGI - Free Report) and Hawkins, Inc. (HWKN - Free Report)
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 11.1%. The company's shares have soared 139.2% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Alamos Gold current-year earnings is pegged at $1.24 per share. AGI, carrying a Zacks Rank #1, surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while missing twice, with an average earnings surprise of 1.4%. The company's shares have rallied 65.1% in the past year.
Hawkins, which currently carries a Zacks Rank #2, beat the consensus estimate in one of the trailing four quarters, while missing thrice. In this time frame, it has delivered an earnings surprise of roughly 8.2%, on average. The company's shares have rallied 54.6% in the past year.