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CF (CF) Up 4.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for CF Industries (CF). Shares have added about 4.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CF Industries' Earnings and Sales Miss Estimates in Q1

CF Industries reported a first-quarter 2024 profit of $194 million or $1.03 per share, down from $560 million or $2.85 per share in the year-ago quarter. Earnings per share missed the Zacks Consensus Estimate of $1.47.

Net sales fell 26.9% year over year to $1.47 billion in the quarter. The figure missed the Zacks Consensus Estimate of $1.474 billion.

Average selling prices in the reported quarter were lower than in the first quarter of 2023 as decreased global energy costs reduced the global market clearance price required to meet global demand.

Segmental Review

Net sales in the Ammonia segment fell 5.2% year over year to $402 million in the reported quarter. It topped our estimate of $325 million. Ammonia sales volumes increased due to the inclusion of contractual commitments fulfilled by the recently purchased Waggaman ammonia production facility and spring ammonia applications in North America being moved to the first quarter of 2024 due to favorable weather conditions.

Sales in the Granular Urea segment fell 33.4% year over year to $407 million. It beat our estimate of $367 million. Granular urea sales volumes declined from a year ago owing to lower availability of ammonia for upgrade and reduced supply availability as a result of severe weather that caused urea plant outages.

Sales in the UAN segment declined 36.3% year over year to $425 million. It was below our estimate of $522 million. UAN average selling prices fell in the reported quarter, as lower global energy costs reduced the worldwide market clearance price needed to meet global demand.

Sales in the AN segment declined 28.3% year over year to $114 million. It was above our estimate of $109 million. AN’s average selling prices decreased as lower global energy costs reduced the worldwide market clearance price needed to meet global demand.

Financials

CF Industries’ cash and cash equivalents were around $1.77 billion at the end of the quarter, down around 37% from the prior-year quarter. Long-term debt was roughly $2.97 billion at the end of the quarter, flat year over year.

Cash flow from operations was $445 million for the reported quarter, down from $947 million reported in the prior year.

Capital expenditures in the first quarter totaled $98 million. Management anticipates that capital expenditures for the 2024 will be approximately $550 million.

Outlook

Per CF, the global nitrogen market entered a long supply position early in the second quarter of 2024 as a result of lower-than-expected demand from Europe and India, as well as a buying halt in North America as bad weather delayed spring fieldwork. Management anticipates that in the near future, worldwide demand will continue to be strong due to recovering industrial demand and farmer economics, while global nitrogen trade flows will adjust to account for the extra supply of nitrogen that is available for international trade.

In the long run, management anticipates a tightening of the global supply-demand balance for nitrogen, as the growth in global nitrogen capacity over the next four years is not expected to keep up with the estimated 1.5% annual growth in global nitrogen demand for traditional applications and the additional demand for clean energy applications. The ongoing issues with natural gas availability and cost are predicted to limit global production.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -16.56% due to these changes.

VGM Scores

At this time, CF has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CF has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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