Markets

Will CVR Partners (UAN) Surprise This Earnings Season? - Analyst Blog

CVR Partners, LP ( UAN ) is set to release fourth-quarter 2014 results before the opening bell on Feb 19.

In the last quarter, this fertilizer company had delivered a negative earnings surprise of roughly 19% due to weak pricing and lower production levels, resulting from unplanned downtime at its gasification unit. Let's see how things are shaping up for this announcement.

Factors to Consider

CVR Partners saw lower revenues and earnings in the third quarter and its production was adversely affected by the breakdown of two of the company's gasifiers simultaneously in the quarter for 5 days. The quarter also endured several repairs and maintenance works, affecting overall production levels.

CVR Partners also witnessed around 2% and 0.4% year-over-year decline in its average gate prices for Urea Ammonium Nitrate (UAN) and ammonia, respectively, owing to typical seasonality.

For the fourth quarter, CVR Partners expects its production levels to increase on the back of its strong daily production rates. Moreover, the company anticipates higher corn plantation this year that can drive demand for nitrogen fertilizers in spring. Also, domestic nitrogen production units are expected to be well positioned on the global cost curve as lower raw material and transportation costs facilitate attractive market conditions for CVR Partners and other domestic nitrogen manufacturers.

On the basis of the above expectations, CVR Partners believes that the demand and prices for nitrogen fertilizers will remain steady through spring this year. The company has also received approval for its sister company, CVR Refining, for building a new hydrogen plant. Hydrogen produced in the new plant will enable production of additional ammonia. CVR Partners expects that the new hydrogen plant can increase its current ammonia production by 5%.

Earnings Whispers

Our proven model shows that CVR Partners is likely to beat earnings this season because it has the right combination of the two key components.

Zacks ESP: CVR Partners has an Earnings ESP of +9.09% - the difference between the Most Accurate estimate of 24 cents and the Zacks Consensus Estimate of 22 cents. This indicates a likely positive earnings surprise.

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

CVR Partners' Zacks Rank #3 and positive ESP make us reasonably confident of a positive earnings beat.

Stocks that Warrant a Look

Here are some other 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:

Daqo New Energy Corp. ( DQ ) has an Earnings ESP of +41.18% and a Zacks Rank #2 (Buy).

Rio Alto Mining Limited ( RIOM ) has an Earnings ESP of +20.00% and a Zacks Rank #3 (Hold).

Century Aluminum Co. ( CENX ) has an earnings ESP of +9.23% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CENTURY ALUM CO (CENX): Free Stock Analysis Report

CVR PARTNERS LP (UAN): Free Stock Analysis Report

RIO ALTO MINING (RIOM): Free Stock Analysis Report

DAQO NEW ENERGY (DQ): Get Free Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

CENX UAN DQ

Other Topics

Earnings Stocks