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CF Industries' (CF) Earnings Top Estimates in Q2, Sales Lag

CF Industries Holdings, Inc. CF reported a profit of $1,165 million or $5.58 per share in the second quarter of 2022, surging from a profit of $246 million or $1.14 in the year-ago quarter.

Barring one-time items, earnings came in at $6.19 per share for the reported quarter, topping the Zacks Consensus Estimate of $6.06. Our estimate for the quarter was $7.18.

Net sales jumped around 113% year over year to $3,389 million in the quarter. The figure missed the Zacks Consensus Estimate by 6.3%. The figure compares to our estimate of $3,715.2 million.

The company benefited from higher average selling prices across all segments on reduced global supply availability and strong demand. Supply was impacted by higher global energy costs leading to lower global operating rates and geopolitical factors that disrupted the global fertilizer supply chain.

Sales volumes were lower year over year in the reported quarter as operations at the company’s Ince manufacturing facility remain halted and unfavorable weather delayed the North American spring application season and reduced the number of acres planted.

 

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise

 

CF Industries Holdings, Inc. Price, Consensus and EPS Surprise
CF Industries Holdings, Inc. Price, Consensus and EPS Surprise

CF Industries Holdings, Inc. price-consensus-eps-surprise-chart | CF Industries Holdings, Inc. Quote

 

Segment Review

Net sales in the Ammonia segment increased more than two-fold year over year to $1,115 million in the reported quarter. This compares to the consensus estimate of $1,196 million and our estimate of $1,052.3 million. Sales volume were similar to the prior year’s levels. Average selling prices in the quarter increased year over year on strong global demand and lower supply availability.

Sales in the Granular Urea segment jumped 92% year over year to $833 million. This compares to the consensus estimate of $843 million and our estimate of $927 million. Both average selling prices and sales volume increased in the quarter.
 
Sales in the UAN segment surged around 125% over year to $976 million. This compares to the consensus estimate of $1,086 million and our estimate of $1,148.1 million. Sales volume in the quarter were down from prior year’s levels. Average selling prices increased in the quarter.

Sales in the AN segment rose around 86% year over year to $253 million. This compares to the consensus estimate of $266 million and our estimate of $302 million.  Sales volumes were down year over year while average selling prices increased on strong demand and reduced supply.

Financials

CF Industries’ cash and cash equivalents increased more than three-fold year over year to $2,370 million at the end of the quarter. Long-term debt was $2,964 million at the end of the quarter, down around 20% year over year.

Net cash provided by operating activities was $889 million for the reported quarter, up nearly seven-fold year over year.

The company repurchased around 6.6 million shares for $590 million during the first half of 2022.

Outlook

CF Industries sees strong the global nitrogen supply-demand balance to remain tight for the foreseeable future, supported by resilient agricultural-led demand and uncertainty about global production and export supply availability. Energy spreads between low-cost producers and marginal production in Europe and Asia also expected to remain historically wide.

Demand for nitrogen remains favorable, supported by the need to replenish global grains stocks, per the company. It projects corn plantings in the United States to be lower than its expectation of 91-93 million acres at the beginning of 2022 due to poor weather during the spring that affected planting decisions. Nitrogen demand for industrial use in North America is expected to be supported by mining activity.

CF Industries also expects India to tender on a regular basis into 2023 as higher domestic production is unlikely to fully meet increased demand as growers boost grain production. The company also envisions urea consumption in Brazil to remain strong this year, backed by high crop prices, expected high planted corn acres and improved farm incomes.

Price Performance

Shares of CF Industries have surged 102.8% in the past year compared with a 57.1% rise of the industry.

 

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Zacks Rank & Other Key Picks

CF Industries currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks worth considering in the basic materials space include Cabot Corporation CBT, ATI Inc. ATI and Albemarle Corporation ALB.

Cabot, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 0.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 37% over a year.

ATI, currently carrying a Zacks Rank #2, has a projected earnings growth rate of 1,069.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 12.5% upward in the past 60 days.

ATI’s earnings beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI shares are up around 27% in a year.

Albemarle has a projected earnings growth rate of 247% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 7.8% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 16% in a year. The company flaunts a Zacks Rank #2.


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