CF Industries (CF) Q3 Earnings & Revenues Beat Estimates

Fertilizer maker CF Industries Holdings, Inc. (NYSE:CF) posted net loss of $87 million or 37 cents per share in the third quarter of 2017, wider than a net loss of $30 million or 13 cents recorded a year ago.

Barring one-time items, adjusted loss came in at 39 cents per share for the quarter, which was narrower than the Zacks Consensus Estimate of a loss of 55 cents for the quarter.

Net sales increased roughly 27.9% year over year to $870 million in the quarter. The figure also beat the Zacks Consensus Estimate of $723 million. Sales improved in the quarter as higher volumes offset the impact of lower average selling prices in most segments.

Segment Review

Net sales for the Ammonia segment rose roughly 33.8% year over year to $194 million in the reported quarter. Ammonia sales volumes rose 63.6% year over year to 826,000 tons owing to additional production volumes from the new capacity expansions at Donaldsonville and Port Neal complexes. Average selling prices declined 18.1% year over year to $235 per ton due to excess global nitrogen supply.

Sales for the Granular Urea segment rose roughly 36.5% year over year to $228 million. Sales volumes increased roughly 42.2% year over year to 1,170,000 tons, driven by additional volume available from the new urea capacity at the Port Neal nitrogen complex. Average selling prices for granular urea declined 3.9% year over year to $195 per ton owing to elevated global nitrogen supply.

Sales at the urea ammonium nitrate solution (UAN) segment rose 14.6% year over year to $243 million. UAN sales volume increased roughly 25.4% year over year to 1,693,000 in the quarter due to higher customer participation in the company's summer UAN fill program compared with the prior-year period. Average selling prices went down about 8.3% year over year to $144 per ton, hurt by elevated global nitrogen supply.

Sales at the ammonium nitrate (AN) segment went up 31.1% year over year to $135 million. Sales volumes rose about 11.9% to 670,000 tons and average selling prices increased 16.9% year over year to $201 per ton, owing to a new long-term AN supply agreement which started in 2017.

Financials

CF Industries’ cash and cash equivalents were $1,992 million at the end of the third quarter, up 28.2% year over year.

Long-term debt was $4,988 million, down around 10% year over year.

Outlook

According to CF Industries, the third quarter witnessed a rapid increase in the global price of urea from second quarter, which was driven by considerably lower Chinese exports, higher production and energy costs, a weaker dollar and strong global demand.

Moving forward, the company expects lower Chinese urea export volumes to continue and volatility in nitrogen prices in global markets to continue through 2018.

Price Performance

CF Industries’ shares have moved up 23.9% in the last three months outperforming the 14% growth recorded by its industry.

Zacks Rank & Other Stocks to Consider

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

Some other top-ranked stocks in the basic materials space are Sociedad Quimica y Minera S.A. (NYSE:SQM) , FMC Corporation (NYSE:FMC) and Westlake Chemical Corporation (NYSE:WLK) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

FMC has an expected long-term earnings growth rate of 11.3%.

Westlake Chemical has an expected long-term earnings growth rate of 8.3%.

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