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CF Industries (CF) Shares Up 77% YTD: What's Driving the Rally?
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CF Industries Holdings, Inc. (CF - Free Report) shares have jumped 77.2% year to date, outperforming the industry’s rise of 29.4%. The company is benefiting from higher nitrogen fertilizer demand and prices and a rebound in industrial demand.
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Let’s dive into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.
What’s Favoring CF Industries?
The company is gaining from higher global demand for nitrogen fertilizers backed by strong crop commodity prices. Higher corn acres planted in the United States, increased canola plantings in Canada and strong farm economics in Brazil have fueled nitrogen demand for the company.
After bearing the brunt of lower nitrogen prices in 2020, CF Industries is gaining from higher prices this year. Last year, prices were affected by greater global supply due to increased international operating rates. Moreover, lower global energy prices had also put pressure on prices. The company is benefiting from a rebound in nitrogen pricing in 2021 on the back of lower supply resulting from reduced operating rates across Europe and Asia due to higher energy prices. The company’s sales in the last reported quarter were boosted by higher nitrogen prices and it expects the positive pricing environment to continue.
CF Industries recently raised its adjusted EBITDA outlook for 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 is also dedicated to boosting shareholders’ value by leveraging strong cash flows. The company is currently executing a $1 billion share repurchase program authorized through 2021. During the third quarter of 2021, the company repurchased around 1.1 million shares for $50 million. Its board has recently approved a new $1.5 billion share repurchase program. CF Industries remains committed to returning cash to shareholders through opportunistic share buybacks and quarterly dividends.
CF Industries is pursuing actions to de-leverage its balance sheet. Long-term debt was $3,465 million at the end of the third quarter, down 12.5% year over year. Also, its cash and cash equivalents rose around 37% year over year to $757 million at the end of the third quarter. The company has redeemed the $250 million of Senior Notes due June 2023, lowering its long-term debt to $3.5 billion. It remains committed to reducing its gross debt to $3 billion.
Earnings estimates for CF Industries have also been going up over the past three months, with the Zacks Consensus Estimate for earnings increasing 33% for 2021 and 65% for 2022. The favorable estimate revisions instill investors’ confidence in the stock.
Univar has an expected earnings growth rate of 55.2% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9% upward over the past 60 days.
Univar beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 24.1%, on average. UNVR’s shares have rallied 43.8% over a year.
Chemours has an expected earnings growth rate of 105.1% for the current year. The Zacks Consensus Estimate for CC’s earnings for the current year has been revised 10% upward in the past 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company delivered a trailing four-quarter earnings surprise of roughly 34.2%, on average. CC has gained 17.5% over a year.
AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 47%, on average. ASIX’s shares have also surged 123.9% over a year.
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CF Industries (CF) Shares Up 77% YTD: What's Driving the Rally?
CF Industries Holdings, Inc. (CF - Free Report) shares have jumped 77.2% year to date, outperforming the industry’s rise of 29.4%. The company is benefiting from higher nitrogen fertilizer demand and prices and a rebound in industrial demand.
Let’s dive into the factors behind this Zacks Rank #1 (Strong Buy) stock’s price appreciation.
What’s Favoring CF Industries?
The company is gaining from higher global demand for nitrogen fertilizers backed by strong crop commodity prices. Higher corn acres planted in the United States, increased canola plantings in Canada and strong farm economics in Brazil have fueled nitrogen demand for the company.
After bearing the brunt of lower nitrogen prices in 2020, CF Industries is gaining from higher prices this year. Last year, prices were affected by greater global supply due to increased international operating rates. Moreover, lower global energy prices had also put pressure on prices. The company is benefiting from a rebound in nitrogen pricing in 2021 on the back of lower supply resulting from reduced operating rates across Europe and Asia due to higher energy prices. The company’s sales in the last reported quarter were boosted by higher nitrogen prices and it expects the positive pricing environment to continue.
CF Industries recently raised its adjusted EBITDA outlook for 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 is also dedicated to boosting shareholders’ value by leveraging strong cash flows. The company is currently executing a $1 billion share repurchase program authorized through 2021. During the third quarter of 2021, the company repurchased around 1.1 million shares for $50 million. Its board has recently approved a new $1.5 billion share repurchase program. CF Industries remains committed to returning cash to shareholders through opportunistic share buybacks and quarterly dividends.
CF Industries is pursuing actions to de-leverage its balance sheet. Long-term debt was $3,465 million at the end of the third quarter, down 12.5% year over year. Also, its cash and cash equivalents rose around 37% year over year to $757 million at the end of the third quarter. The company has redeemed the $250 million of Senior Notes due June 2023, lowering its long-term debt to $3.5 billion. It remains committed to reducing its gross debt to $3 billion.
Earnings estimates for CF Industries have also been going up over the past three months, with the Zacks Consensus Estimate for earnings increasing 33% for 2021 and 65% for 2022. The favorable estimate revisions instill investors’ confidence in the stock.
Other Stocks to Consider
Other top-ranked stocks from the basic materials space include Univar Solutions Inc. and The Chemours Company (CC - Free Report) , both sporting a Zacks Rank #1, and AdvanSix Inc. (ASIX - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Univar has an expected earnings growth rate of 55.2% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 9% upward over the past 60 days.
Univar beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 24.1%, on average. UNVR’s shares have rallied 43.8% over a year.
Chemours has an expected earnings growth rate of 105.1% for the current year. The Zacks Consensus Estimate for CC’s earnings for the current year has been revised 10% upward in the past 60 days.
Chemours beat the Zacks Consensus Estimate for earnings in each of the last four quarters. The company delivered a trailing four-quarter earnings surprise of roughly 34.2%, on average. CC has gained 17.5% over a year.
AdvanSix has an expected earnings growth rate of 197% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised 14.1% upward over the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in the four trailing quarters, with the earnings surprise being 47%, on average. ASIX’s shares have also surged 123.9% over a year.