CF Industries (CF) Shares Rally 60% in a Year: What's Driving It?
CF Industries (CF) benefits from healthy demand for nitrogen fertilizers and higher nitrogen prices.
CF Industries Holdings, Inc.’s CF shares have shot up 60.4% over a year. The company has outperformed its industry’s rise of 20.3% over the same time frame. It has also topped the S&P 500’s 25.4% rise over the same period.
Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.
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What’s Going in CF’s Favor?
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 are driving its sales as witnessed in the last-reported quarter. The positive pricing environment is expected to continue moving ahead.
The company, last month, raised its adjusted EBITDA outlook for full-year 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 also sees higher-than-expected sales volumes led by favorable weather, which has enabled the strongest fall ammonia application season in North America over the last decade.
The company 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, in Nov 2021, approved a new $1.5 billion share repurchase program. The program, which is effective Jan 1, 2022, runs through the end of 2024.
Earnings estimates for CF Industries have also been going up over the past two months. The Zacks Consensus Estimate for 2022 has increased around 30%. The favorable estimate revisions instill investor confidence in the stock.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Commercial Metals Company CMC and AdvanSix Inc. (ASIX).
Albemarle, currently sporting a Zacks Rank #1, has an expected earnings growth rate of 49.8% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 9.2% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 22.1%. ALB shares have gained around 27% in a year.
Commercial Metals, carrying a Zacks Rank #1, has a projected earnings growth rate of 10.5% for the current fiscal year. CMC's consensus estimate for the current fiscal year has been revised 6.6% upward over the past 60 days.
Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 7.4%, on average. CMC has rallied around 58% in a year.
AdvanSix, carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 3.9% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised 1.6% upward in 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 112% in a year.
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