On Feb 28, we upgraded our recommendation on leading
) to Outperform based on its strong fourth-quarter 2012 earnings
and favorable outlook. Strength in the ammonia market, favorable
natural gas costs and excellent execution helped the company to
rake in record earnings in the quarter.
Why the Upgrade?
CF Industries' adjusted earnings of $7.27 per share, reported on
Feb 19, trumped the Zacks Consensus Estimate of $7.03. On a
reported basis, the company earned a record $7.40 a share in the
quarter, up 11.1% from $6.66 a year ago. Revenues, however, fell
roughly 14% in the quarter due to a change in selling price
calculation methodology and missed expectations.
CF Industries is positive regarding first-half 2013 based on high
corn planting expectations, strong domestic fertilizer demand and
favorable natural gas costs.
CF Industries is benefiting from high global prices for
commodities, declining natural gas costs in North America and a
solid start to the domestic planting season. Moreover, the
company has a strong cash flow profile, which allows it to return
value to shareholders and invest in growth initiatives.
Falling natural gas prices have been a boon for CF Industries.
The company's Nitrogen segment is reaping the benefit of abundant
natural gas supply, driven by increased production of North
American shale gas and favorable weather. Lower natural gas costs
led to higher gross margin in the Nitrogen division in the fourth
CF Industries continues to invest in lucrative projects. The
company, in Aug 2012, entered into a deal with Glencore
International to buy a 34% interest in the Medicine Hat nitrogen
facility owned by Viterra Inc (a wholly-owned subsidiary of
Glencore). The deal replaced an earlier agreement under which
Glencore planned to sell the stake to
). The acquisition will boost CF Industries' nitrogen production
Moreover, CF Industries is expected to benefit from strong U.S.
corn plantations. Roughly 97 million acres of corn are expected
to be planted in 2013, thereby driving the demand for crop
nutrients, in particular, nitrogen.
Other Stocks to Consider
Other fertilizer companies having favorable Zacks Rank are
Rentech Nitrogen Partners, L.P.
). Both hold a Zacks Rank #2 (Buy).
AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
RENTECH NITROGN (RNF): Free Stock Analysis
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