CF Industries Holdings, Inc.’s (CF - Free Report) stock looks promising at the moment. The company, currently carrying a Zacks Rank #2 (Buy), has seen its shares rally roughly 17% year to date. We believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s delve deeper into the factors that make this fertilizer company an attractive investment option.
Forecast-topping Q3, Improving Global Demand: CF Industries’ adjusted loss for the third quarter came in at 39 cents per share, narrower than the Zacks Consensus Estimate of a loss of 55 cents for the quarter.
Net sales increased roughly 27.9% year over year to $870 million in the quarter. The figure also topped the Zacks Consensus Estimate of $723 million. CF Industries also recorded highest third-quarter sales volume in the company history of roughly 4.87 million.
Per the company, global demand for urea was strong during the third quarter and imports to Brazil went up through August by roughly 50% year over year. Also, during the quarter, India issued three tenders resulting in purchase of 1.4 million metric tons of urea.
According to CF Industries, the third quarter witnessed a rapid increase in the global price of urea from second quarter, which was driven by considerably lower Chinese exports, higher production and energy costs, a weaker dollar and strong global demand.
The company expects a consistent global nitrogen demand growth, which should be partly driven by rising global population and industrial growth on the back of increased adoption of emission control, recovering mining sector and synthetic nitrogen products.
CF Industries is also well placed to gain from its efforts to boost production capacity. The company is also enjoying the benefit of ample natural gas supply.
Estimates Northbound: Estimates for CF Industries have been moving up of late, reflecting analysts’ confidence in the stock. In fact, over a month, current-quarter estimates have narrowed from a loss of 22 cents per share to a loss of 11 cents, while current-year estimates have narrowed from a loss of 62 cents per share to a loss of 35 cents.
Price Performance: CF Industries has significantly outperformed the industry it belongs to year to over the past three months. The company’s shares have moved up 27.3% over this period, compared with roughly 14.9% growth recorded by the industry.
Attractive Valuation: CF Industries’ valuation is currently very attractive as the stock’s trailing 12-month EV/EBITDA multiple, which is often used to value fertilizer stocks, is 11.4, much cheaper than its industry’s average trailing 12-month EV/EBITDA multiple of 24.7.
Other Stocks to Consider
Some other top-ranked stocks in the basic materials space are Koppers Holdings Inc. (KOP - Free Report) , Daqo New Energy Corp. (DQ - Free Report) and Kronos Worldwide Inc. (KRO - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
Koppers has an expected long-term earnings growth rate of 18%. Its shares have moved up 23.5% year to date.
Daqo New Energy has an expected long-term earnings growth rate of 7%. Its shares have surged a whopping 169.5% year to date.
Kronos Worldwide has an expected long-term earnings growth rate of 5%. Its shares have rallied 132.5% year to date.
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