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CVR Partners (UAN) to Report Q4 Earnings: What's in Store?

CVR Partners, LPUAN is set to release fourth-quarter 2015 results ahead of the bell on Feb 18.

In the last quarter, the fertilizer company had delivered a negative earnings surprise of 333.33%. The company swung to a loss in the quarter, hit by a major plant turnaround, outages and costs related to its planned purchase of Rentech Nitrogen Partners RNF . Revenues also fell by double digits on lower production volumes and pricing and trailed expectations.

Let's see how things are shaping up for this announcement.

Factors to Consider

CVR Partners is facing pricing pressure stemming from lower nitrogen fertilizer prices. It is seeing lower prices for urea ammonium nitrate ("UAN"), as reflected by a roughly 11% decline in the third quarter. Increased supply from Chinese producers is keeping urea prices under pressure. Weak prices may continue to weigh on the company's top line in the fourth quarter.

Moreover, the company's operations are subject to the risks of production outages due to plant shutdowns. It witnessed a major three-week plant turnaround during the third quarter, involving expenses of roughly $7 million. This downtime is expected to impact CVR Partners' full-year 2015 distribution.

Additionally, CVR Partners has a major plant turnaround for Coffeyville, scheduled for the second half of 2017. A prolonged plant shutdown, if any, could have an adverse impact on its results of operations and financial condition.

CVR Partners is also facing intense pricing competition from other fertilizer producers. Lower cost of natural gas, which is used as primary feedstock by most of its competitors, unfavorably impacts the company's competitive position vis-à-vis other nitrogen fertilizer makers.

Nevertheless, CVR Partners remains focused on ramping up its UAN production capacity and is progressing well with its capacity expansion projects. Moreover, the proposed acquisition of Rentech Nitrogen offers a compelling opportunity as the merger will create one of the biggest UAN producers in North America. CVR Partners anticipates the deal to be double-digit accretive to distributable cash per unit before synergies.

Earnings Whispers

Our proven model does not conclusively show that CVR Partners is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: ESP for CVR Partners is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 17 cents.

Zacks Rank: CVR Partners' Zacks Rank #3 (Hold), when combined with a 0.00% ESP, makes surprise prediction difficult.

Note that stocks with Zacks Rank of #1, 2 and 3 have a significantly higher chance of beating earnings. Conversely, the Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks that Warrant a Look

Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Pan American Silver Corp. PAAS has an Earnings ESP of +12.50% and a Zacks Rank #3.

U.S. Silica Holdings, Inc. SLCA has an Earnings ESP of +25% and a Zacks Rank #3.

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PAN AMER SILVER (PAAS): Free Stock Analysis Report

US SILICA HOLDI (SLCA): Free Stock Analysis Report

RENTECH NITROGN (RNF): Free Stock Analysis Report

CVR PARTNERS LP (UAN): Free Stock Analysis Report

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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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