CF Industries at 52-Week High on Nitrogen Fertilizer Demand - Analyst Blog

Shares of CF Industries Holdings, Inc. ( CF ) touched a new 52-week high of $292.72 on Jan 7, surpassing its previous high of $290.29, before eventually closing marginally lower at $290.74.

The fertilizer maker, which has a market cap of around $14.5 billion, has seen its shares rise roughly 29.5% over the past year. Average volume of shares traded over the last three months is around 810.7K. The company's long-term projected EPS growth is around 8.1%.

Driving Factors

CF Industries, a Zacks Rank #3 (Hold) stock, is poised to benefit from the rising global demand for nitrogen-based fertilizers in 2015. Over the next five years, global capacity and production of fertilizers are expected to increase further due to sustained levels of consumption in emerging markets and recovery in traditional markets.

CF Industries' profit for third-quarter 2014, reported on Nov 5, 2014, slid year over year on a double-digit decline in sales. The bottom line was hit by higher natural gas costs. Both revenues and earnings missed the Zacks Consensus Estimate. However, CF Industries is optimistic about nitrogen demand in 2015.

CF Industries should benefit from healthy U.S. corn plantations. More than 90 million acres of corn are expected to be planted in 2015, thereby driving the demand for nitrogen. Moreover, strong demand for urea is anticipated in North America due to significant corn and wheat acres expected to be planted this year. This is expected to result in price appreciation during the spring application season.

CF Industries also remains on track with its capacity expansion projects in Louisiana and Iowa. Both projects are expected to expand the company's production capacity by 25%. CF Industries' spending on capacity expansion projects for the last year is expected to reach $1.6 billion.

CF Industries also has a strong cash flow profile, which allows it to return value to shareholders and invest in growth initiatives. The company, in Aug 2014, raised its quarterly dividend by 50% and announced an additional $1 billion share repurchase program.

That said, CF Industries remains exposed to pricing pressure.

Other Stocks to Consider

Other companies in the broader basic materials sector worth considering are Air Products & Chemicals Inc. ( APD ), PPG Industries Inc. ( PPG ) and Kronos Worldwide, Inc. ( KRO ), all carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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