CF Industries Holdings (NYSE:CF), Inc.’s CF stock looks promising at the moment. The company’s shares have popped roughly 16% over the past six months. It is well placed to benefit 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 A. 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 a attractive investment option at the moment.
Price Performance
Shares of CF Industries have gained 28.7% year to date against the 18.8% rise of its industry. It has also outperformed the S&P 500’s roughly 15.9% rise over the same period.
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Estimates Going Up
Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for CF Industries for the current year has increased 67.7%. The consensus estimate for second-quarter 2021 has also been revised 50.5% upward over the same time frame.
Solid Growth Prospects
The Zacks Consensus Estimate for earnings for the current year for CF Industries is currently pegged at $3.94, reflecting an expected year-over-year growth of 168%. Moreover, earnings are expected to register an 84.3% growth in the second quarter.
Attractive Valuation
Valuation looks attractive as CF Industries’ shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value fertilizer stocks, CF Industries is currently trading at trailing 12-month EV/EBITDA multiple of 9.37, cheaper than the industry average of 13.94.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 7.2%, above the industry’s level of 6.1%.
Growth Drivers in Place
CF Industries is expected to gain from higher nitrogen fertilizer demand in major markets. Global nitrogen demand is expected to remain strong this year. Strong crop commodity prices are contributing to higher demand globally. Industrial demand has also recovered from the pandemic-related disruptions.
The company sees around 90-92 million planted corn acres in the United States in 2021. It also expects higher canola plantings in Canada to support nitrogen demand. Moreover, CF Industries projects higher nitrogen demand in North America for industrial uses. The company anticipates nitrogen requirements in other regions to remain strong this year, which is likely to be driven by strong demand for urea imports from India and Brazil.
CF Industries is also benefiting from higher nitrogen prices. The company’s average selling prices in the first quarter were higher on a year-over-year basis across most segments due to lower global supply availability. CF Industries expects nitrogen pricing to be positive in 2021 as global nitrogen supply and demand balance has been significantly tightened by low global coarse grains stocks-to-use ratios as well as higher energy prices in Asia and Europe. As such, higher nitrogen prices are expected to drive the company’s sales and bottom line.
CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NYSE:NUE) NUE, ArcelorMittal (NYSE:MT) MT and Cabot (NYSE:CBT) Corporation CBT.
Nucor has a projected earnings growth rate of 386.2% for the current year. The company’s shares have surged around 133% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has an expected earnings growth rate of 1,229.9% for the current year. The company’s shares have surged around 166% in the past year. It currently carries a Zacks Rank #1.
Cabot has an expected earnings growth rate of around 137.5% for the current fiscal. The company’s shares have surged roughly 55.7% in the past year. It currently has a Zacks Rank #2.
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