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What Makes CF Industries (CF) Stock a Solid Choice Right Now?
Zacks Equity Research December 15, 2021
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CF Industries Holdings, Inc.’s (CF Quick QuoteCF - Free Report) stock looks promising at the moment. The company’s shares have popped roughly 27% over the past three months. It is benefiting from healthy demand for nitrogen fertilizers and higher nitrogen prices.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
CF Industries currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let's see what makes this fertilizer maker an attractive investment option at the moment.
Price Performance
Shares of CF Industries have shot up 60.8% year to date compared with the 31.5% rise of its industry. It has also outperformed the S&P 500’s roughly 24.3% rise over the same period.
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Solid Growth Prospects
The Zacks Consensus Estimate for earnings for the current year for CF Industries is currently pegged at $3.58, reflecting an expected year-over-year growth of 143.5%. Earnings are also expected to register 565% growth in the fourth quarter of 2021.
Superior Return on Equity (ROE)
ROE is the measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 12.1%, above the industry’s level of 11.1%.
Capital Allocation
CF Industries remains committed to boosting shareholders’ value by leveraging strong cash flows. It generated cash flow from operations of $687 million in the third quarter of 2021, up around 208% year over year. During the third quarter, the company repurchased around 1.1 million shares for $50 million. Its board, last month, approved a new $1.5 billion share repurchase program. The program, which is effective Jan 1, 2022, runs through the end of 2024.
Upbeat Prospects
CF Industries is gaining from higher nitrogen fertilizer demand in major markets. Higher crop commodity prices are contributing to healthy demand globally. Industrial demand has also recovered from the pandemic-related disruptions.
The company is also benefiting from higher nitrogen prices on the back of lower supply resulting from reduced operating rates across Europe and Asia due to higher energy prices. Higher nitrogen prices boosted the company’s sales in the last-reported quarter. The positive pricing environment is expected to continue moving ahead. Higher nitrogen prices are expected to drive the company’s sales and bottom line.
The company recently raised its adjusted EBITDA outlook for 2021 to $2.65-2.85 billion from the earlier guidance of $2.2-2.4 billion. The upside reflects continued strong global nitrogen market conditions that have led to higher-than-expected realized pricing for products sold on an index basis.
CF Industries sees higher-than-expected sales volumes through year-end led by favorable weather, which has enabled the strongest fall ammonia application season in North America over the last decade.
Other Stocks to Consider
Some other top-ranked stocks worth considering from the basic materials space include Nutrien Ltd. (NTR Quick QuoteNTR - Free Report) , AdvanSix Inc. (ASIX Quick QuoteASIX - Free Report) and Intrepid Potash, Inc. (IPI Quick QuoteIPI - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien has an expected earnings growth rate of 212.2% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 10.6% upward over the past 60 days.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 73.5%, on average. NTR has rallied around 44% in a year.
AdvanSix has a projected earnings growth rate of 194.5% for the current year. ASIX's consensus estimate for the current year has been revised 5.9% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 120% in a year.
Intrepid Potash has a projected earnings growth rate of 244.7% for the current year. The consensus estimate for IPI’s current year has been revised 3.3% upward over the past 60 days.
Intrepid Potash beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 132.9%, on average. IPI shares have surged around 159% in a year.