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CF Industries Up 21% in 3 Months: What's Behind the Rally?

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Shares of CF Industries Holdings, Inc. (CF - Free Report) are up around 21% over the past three months, significantly outperforming the industry’s growth of roughly 3%.

CF Industries, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $11.9 billion and average volume of shares traded in the last three months was around 2,550.4K. The company has an expected long-term earnings per share growth rate of 6%.  

Let’s take a look into the factors that are driving this fertilizer company.

Driving Factors

Upbeat demand and pricing outlook for nitrogen fertilizer has contributed to the rally in CF Industries’ shares. The company is gaining from higher nitrogen demand driven by healthy corn plantations and cyclical recovery in the nitrogen fertilizer industry.

CF Industries envisions strong demand in Brazil through the remainder of 2018. It sees a year-over-year increase in urea imports to Brazil during the second half of 2018 partly owing to the expected lost production from the scheduled closure of two Petrobras urea plants in August.

Moreover, CF Industries is poised to benefit from higher prices of nitrogen fertilizers. Higher production costs across Europe and China coupled with reduced production due to the enforcement of environmental regulations in China tightened global nitrogen supply and demand balance and boosted nitrogen prices during first-half 2018.

These factors are expected to continue to drive prices in the third quarter. The company also expects demand in Brazil and India to support global nitrogen prices through the balance of 2018.

Earnings estimates for CF Industries have also moved up over the past two months. Over this period, the Zacks Consensus Estimate for 2018 has increased by around 14.4% to $1.43. The Zacks Consensus Estimate for the third quarter has also shot up 100% over the same timeframe to 10 cents.

The Zacks Consensus Estimate for earnings for 2018 reflects an expected year-over-year growth of a staggering 672%. For the third quarter, earnings are expected to rise 125.6% year over year.

Other Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Methanex Corporation (MEOH - Free Report) , KMG Chemicals, Inc. and Nutrien Ltd. (NTR - Free Report) .

Methanex has an expected long-term earnings growth rate of 15% and carries a Zacks Rank #1. The company’s shares have gained around 11% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

KMG Chemicals has an expected long-term earnings growth rate of 28.5% and sports a Zacks Rank #2 (Buy). The company’s shares are up roughly 15% over the past six months.

Nutrien has an expected long-term earnings growth rate of 14% and carries a Zacks Rank #2. The company’s shares have gained around 16% over the past six months.

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