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CF (CF) Down 14.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CF Industries (CF - Free Report) . Shares have lost about 14.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CF Industries Misses Earnings & Sales Estimates in Q3

CF Industries reported profit of $30 million or 13 cents per share in the third quarter of 2018, against a net loss of $87 million or 37 cents in the year-ago quarter. The figure missed the Zacks Consensus Estimate of 15 cents.

Net sales increased around 19.5% year over year to $1,040 million in the quarter, mainly driven by higher average selling prices across all segments. However, the figure trailed the Zacks Consensus Estimate of $1,072.2 million.

Segment Review

Net sales in the Ammonia segment declined roughly 1% year over year to $192 million in the third quarter. Ammonia sales volumes fell 20.5% year over year to 657,000 tons. Average selling prices rose 24.3% year over year to $292 per ton.

Sales in the Granular Urea segment rose roughly 54.8% year over year to $353 million. Sales volumes increased around 16.5% year over year to 1,363,000 tons. Average selling prices for granular urea rose 32.8% year over year to $259 per ton.

Sales in the UAN segment increased 11.1% year over year to $270 million. UAN sales volume fell roughly 4.3% year over year to 1,620,000 tons in the quarter. Average selling prices rose roughly 16% year over year to $167 per ton.

Sales in the ammonium nitrate segment increased around 3% year over year to $139 million. Sales volumes fell around 10.3% to 601,000 tons. Average selling prices increased 14.9% year over year to $231 per ton.

Financials
 
As of Sep 30, 2018, CF Industries’ cash and cash equivalents were $1,022 million, down roughly 48.7% year over year.

Long-term debt was $4,697 million, down around 5.8% year over year.    

Outlook
 
CF Industries expects the global market fundamentals, which drove higher global nitrogen prices during the third quarter of 2018, to continue through the fourth quarter and into first-half 2019.

Moreover, outlook for global nitrogen demand is positive for the first half of 2019, the company noted. In the United States, farmers are expected to plant 93 million acres of corn in 2019, around four million more acres than 2018 levels. CF Industries expects this along with the expected increase in wheat plantings to drive stronger nitrogen demand in North America.

The company noted that China's role in globally traded urea continued to shrink in the third quarter. Export volumes from China was limited due to enforcement of environmental regulations along with higher feedstock costs, with anthracite coal costs up 22% year over year. Expected demand for urea in Brazil and India is forecast to support a tighter global nitrogen demand and supply balance into 2019.

The company expects capital expenditures for new activities to be roughly $425 million in 2018.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 5.88% due to these changes.

VGM Scores

Currently, CF has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

CF has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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