On Jul 23, Zacks Investment Research downgraded leading
CF Industries Holdings, Inc.
) to Zacks Rank #5 (Strong Sell).
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CF Industries reported mixed first-quarter 2013 results on May
8. The company's adjusted earnings (excluding one-time
items) of $6.03 per share were below the year-ago earnings of
$6.06, but exceeded the Zacks Consensus Estimate of $6.00.
Sales were down 12.5% to $1.34 billion in the quarter from $1.53
billion in the prior-year quarter. It also missed the Zacks
Consensus Estimate of $1.45 billion. The decrease reflected lower
sales volumes in both the Nitrogen and Phosphate divisions and
lower average prices for urea and phosphates. Sales also declined
due to the impact of a change in the selling price calculation
method used for products sold by Canadian Fertilizers Limited
CF Industries' sales from Nitrogen segment and Phosphate segment
declined year-over-year, resulting in lower gross margins. Lower
export sales associated with a seasonally slow international
phosphate market and higher phosphate production costs led to
lower sales in the phosphate segment.
CF Industries faces intense pricing competition from both
domestic and foreign fertilizer producers. The company is facing
stiff competition from its domestic peers such as Agrium, Koch
Nitrogen, Mosiac, Potash Corp. and Simplot.
CF Industries is also susceptible to cyclical and seasonal
changes. The prices of its products are highly sensitive to
demand and supply. During periods of industry oversupply, the
operational results are affected negatively as the price at which
the products are sold declines, resulting in reduced profit
margins, write-downs in the value of inventory and temporary or
permanent curtailments of production.
Volatility in raw material costs and high debt level are also
matters of concerns for CF Industries. The company's existing
indebtedness and any additional debt, which it may incur in the
future, could have adverse impact on its operations and
The Zacks Consensus Estimate for 2013 for CF Industries has gone
down 3.7% to $24.69 per share as most estimates were revised
lower over the last 60 days. Similarly, the Zacks Consensus
Estimate for 2014 has also decreased 3.8% to $23.05 per share.
Other Stocks to Consider
Other companies in the basic material sector with favorable
Zacks Rank are
The Andersons, Inc.
). All of them hold a Zacks Rank #2 (Buy).