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CF Industries (CF) Q1 Earnings Miss, Sales Beat Estimates

Fertilizer maker CF IndustriesCF posted a loss of $23 million or 10 cents per share in the first quarter of 2017, as against a profit of $26 million or 11 cents recorded a year ago.

Barring one-time items, adjusted earnings came in at 5 cents per share for the quarter, versus earnings of 43 cents a year ago. Earnings missed the Zacks Consensus Estimate of 9 cents.

Sales rose roughly 3.3% year over year to $1,037 million in the quarter, and beat the Zacks Consensus Estimate of $1,018 million. Sales benefitted from record sales volumes that more than offset lower average selling prices across all segments.

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise | CF Industries Holdings, Inc. Quote

Segment Review

Sales for the Ammonia segment rose roughly 5.6% year over year to $282 million in the reported quarter. Ammonia sales volumes rose 24.8% year over year to 920,000 tons due to additional volumes available for sale from the new ammonia capacity at Donaldsonville and Port Neal nitrogen complexes and higher ammonia production at the Verdigris Nitrogen Complex. Average selling prices declined 15.2% to $307 per ton due to excess global nitrogen supply.

Sales for the Granular Urea segment rose roughly 1.3% year over year to $238 million. Sales volumes increased 4.2% year over year to 958,000 tons, driven by additional volume available from the new urea capacity at the Port Neal nitrogen complex. Average selling prices for granular urea declined 3.1% to $248 per ton owing to elevated global nitrogen supply.

Sales in the UAN (urea ammonium nitrate solution) segment rose 2.6% year over year to $317 million. UAN sales volume jumped 27.3% to 1,849,000 in the quarter due to additional volume available for sale from the Donaldsonville plant, higher inventory levels and a rise in UAN production at the Verdigris nitrogen complex. Average selling prices went down 35% to $171 per ton, hurt by elevated global nitrogen supply.

Sales in the AN (ammonium nitrate) segment remained flat year over year at $125 million. Sales volumes rose 1.8% to 568,000 tons on start of a long-term ammonium nitrate supply agreement. Average selling prices dropped 1.8% to $220 per ton as higher selling prices were neutralized by the impact of unfavorable foreign currency translation due to the weakening British pound.

The Other segment's sales rose around 10.3% year over year to $75 million. Sales volumes were 16.8% higher in the reported quarter at 450,000 tons. Average selling price decreased 5.6% to $167 per ton due to high levels of global nitrogen supply.

Financials

CF Industries' cash and cash equivalents were $1,312 million at the end of the first quarter, a decline of 51.2%. Long-term debt was $5,780 million, up around 4% year over year.

Outlook

CF Industries sees demand for nitrogen in North America to be relatively strong during the spring application season for nitrogen-consuming crops. The company envisions 90 million acres of corn to be planted in the U.S. this year.

The excess global nitrogen supply continues to pressure marginal producers in China and other regions. CF Industries continues to expect 5-6 million metric tons of total urea exports from China this year, a decline of roughly 44% compared to 2016.

CF Industries also anticipates uneven nitrogen pricing environment to continue through 2017. While prices are likely to escalate in spring, the same may drop down to seasonally low levels in summer.

For 2017, the company expects new capital expenditures in the band of around $400 to $450 million for sustaining and other operations.

Price Performance

CF Industries has outperformed the Zacks categorized Fertilizers industry in the past six months, aided by its efforts to boost production capacity. The company's shares have gained around 9.6% over this period, compared with roughly 4% gain recorded by the industry.

Zacks Rank & Key Picks

CF Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the basic material space include Univar Inc. UNVR , The Chemours Company CC and Kronos Worldwide Inc KRO . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Univar has expected long-term growth of 9.4%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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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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