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Why Is CF (CF) Down 1.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for CF Industries (CF - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CF due for a breakout? 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' Q2 Earnings Surpass Estimates, Sales Miss

CF Industries reported second-quarter 2024 earnings of $2.30 per share, down from $2.70 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.80.

Net sales fell around 11.4% year over year to roughly $1.57 billion in the quarter, missing the Zacks Consensus Estimate of $1.58 billion.

Average selling prices in the second quarter were lower year over year due to a fall in global energy costs, which reduced the global market clearing price required to meet demand. Sales volumes were down from the prior-year period as lower ammonia, UAN and AN sales volumes more than offset higher urea sales volumes.

Segment Review

Net sales in the Ammonia segment decreased 22.1% to $409 million in the reported quarter, missing our estimate of $430.1 million. Ammonia adjusted gross margin per ton fell in the first half of 2024 from the 2023 number, mostly due to lower average selling prices and increased maintenance expenses, which were slightly offset by lower realized natural gas costs.

Sales in the Granular Urea segment fell 0.6% year over year to $457 million, topping our estimate of $454.4 million. Granular urea adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, owing primarily to lower average selling prices and the impact of purchased volumes of granular urea to satisfy customer commitments, which was somewhat offset by reduced realized natural gas costs.

Sales in the UAN segment fell around 13.3% year over year to $475 million, missing our estimate of $508.2 million. UAN adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, mainly due to lower average selling prices offset by lower realized natural gas costs.

Sales in the AN segment fell around 5.8% year over year to $98 million, beating our estimate of $94.7 million. AN adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, owing primarily to lower average selling prices, which were partially offset by lower maintenance and realized natural gas expenses.

Financials

As of Jun 30, 2024, CF Industries’ cash and cash equivalents were $1.82 billion, down 43% year over year. Long-term debt was $2.97 billion, stable year over year.

Net cash provided by operating activities was $475 million in the reported quarter, down nearly 33.3% year over year.

Outlook

Per CF Industries, from the end of the second quarter of 2024 into the third quarter, gas curtailments in Egypt and Trinidad, combined with scheduled outages and a lack of significant urea export availability from China, have supported global nitrogen pricing during a time of year when prices and global shipments typically fall as demand shifts from the Northern Hemisphere to the Southern Hemisphere. 

For the near term, management anticipates that the global supply-demand balance will remain positive, driven by nitrogen import requirements for Brazil and India until the end of the year, as well as sustained wide energy spreads between North America and high-cost production in Europe.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 55.68% due to these changes.

VGM Scores

Currently, CF has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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