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What's in the Cards for CVR Partners (UAN) in Q4 Earnings?

Zacks Equity Research
Updated

CVR Partners, LP UAN is set to release fourth-quarter 2017 results, ahead of the bell on Feb 22.

 

Last quarter, the company reported a negative earnings surprise of 180%. In third-quarter 2017, CVR Partners reported a loss of 28 cents per share, compared with the year-ago loss of 12 cents. The figure was wider than the Zacks Consensus Estimate of a loss of 10 cents.

 

On a year-over-year basis, the company’s revenues fell 11.6% to $69.4 million in the third quarter.

 

CVR Partners missed earnings estimates in three of the trailing four quarters with an average negative surprise of 259.6%.

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Let’s take a look at how things are shaping up for this announcement.

 

 

CVR Partners, LP Price and EPS Surprise

 

CVR Partners, LP Price and EPS Surprise | CVR Partners, LP Quote

 

Factors to Consider

CVR Partners faced pricing pressure stemming from lower nitrogen fertilizer prices in the third quarter. Prices for urea ammonium nitrate (UAN) fell roughly 10% in the quarter. Ammonia prices also slipped around 38% in the third quarter.

 

CVR Partners, during its third-quarter call, said that new production capacity continued to unfavorably affect U.S. nitrogen fertilizer pricing. The company, however, has witnessed a significant increase in pricing since July 2017 and is seeing the impact of the same being reflected in product purchases for fourth-quarter 2017 as well as first-half 2018.

 

Meanwhile, the company remains committed to ramp up its UAN production capacity. Moreover, it is likely to benefit from healthy demand for nitrogen fertilizers as well as from the Rentech Nitrogen Partners acquisition. With the buyout of Rentech Nitrogen Partners, the company has been able to create an entity with larger scale, enhance production capacity and increase operating reach. The combined company is now the second-biggest producer of UAN in North America.

 

CVR Partners’ shares have declined around 45.6% over a year, underperforming the industry’s 2% gain.

 

 

 

Earnings Whispers

 

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

 

Zacks ESP: Earnings ESP for CVR Partners is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Zacks Rank: CVR Partners carries a Zacks Rank #4 (Sell). 

 

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

 

Stocks to Consider

 

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

 

Franco-Nevada Corporation FNV has an Earnings ESP of +0.46% and sports a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Huntsman Corporation HUN has an Earnings ESP of +2.22% and carries a Zacks Rank #2.

 

Ferroglobe PLC GSM has an Earnings ESP of +61.77% and carries a Zacks Rank #3.

 

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Huntsman Corporation (HUN) : Free Stock Analysis Report
 
Ferroglobe PLC (GSM) : Free Stock Analysis Report
 
CVR Partners, LP (UAN) : Free Stock Analysis Report
 
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
 
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Zacks Investment Research