CF Industries' (CF) Q4 Earnings, Revenues Top Estimates

CF Industries Holdings, Inc. (NYSE:CF) swung to a profit in the fourth quarter of 2017, aided by a sizable tax benefit. The fertilizer maker logged a profit of $465 million or $1.98 per share in the reported quarter compared with a loss of $320 million or $1.38 per share a year ago. The company recorded a tax benefit of $491 million related to the U.S. Tax Cuts and Jobs Act in the reported quarter.

Barring one-time items, adjusted loss came in at 2 cents per share for the quarter, which was narrower than the Zacks Consensus Estimate of a loss of 11 cents.

Net sales increased roughly 27% year over year to $1,099 million in the quarter. It also beat the Zacks Consensus Estimate of $1,039 million. Sales were driven by increased volumes across most segments and higher selling prices across all segments.

FY17 Results

For 2017, profit was $358 million or $1.53 per share, compared with a loss of $277 million or $1.19 per share logged a year ago. Adjusted loss per share for the year was 25 cents.

Revenues for the full year rose 12% year over year to $4,130 million.

Segment Review

Net sales for the Ammonia segment climbed roughly 63% year over year to $344 million in the reported quarter. Ammonia sales volumes rose 58% year over year to 1,207,000 tons owing to additional production volumes from Donaldsonville and Port Neal complexes and higher demand for fall agricultural applications. Average selling prices rose 3% year over year to $285 per ton, aided by a tighter global nitrogen supply and demand balance.

Sales for the Granular Urea segment rose roughly 30% year over year to $246 million. Sales volumes increased roughly 14% year over year to 1,008,000 tons, driven by additional volume available from the Port Neal nitrogen complex. Average selling prices for granular urea rose 14% year over year to $244 per ton owing to a tighter global nitrogen supply and demand balance.

Sales at the urea ammonium nitrate solution (UAN) segment fell 6% year over year to $288 million. UAN sales volume dipped roughly 6% year over year to 1,920,000 in the quarter due to reduced export sales. Average selling prices were essentially flat year over year at $150 per ton.

Sales at the ammonium nitrate (AN) segment went up 34% year over year to $125 million. Sales volumes rose about 6% to 576,000 tons on increased demand for agricultural and industrial applications. Average selling prices increased 26% year over year to $217 per ton, owing to a tighter global nitrogen supply and demand balance and a new long-term AN supply agreement which started in 2017.

Financials

CF Industries’ cash and cash equivalents were $835 million at the end of 2017, down 28% year over year.

Long-term debt was $4,692 million, down around 19% year over year.

Outlook

Moving ahead, CF Industries expects higher energy costs in major producing regions, lower production in China, a weaker U.S. dollar, increased oil and freight costs and a steady global demand to support nitrogen prices during first-half 2018 at levels higher than the comparable period a year ago.

The company expects capital expenditures for new activities to be in the range of around $400 to $450 million in 2018, factoring in higher number of plant turnarounds compared with 2017.

Price Performance

Shares of CF Industries have moved up 18.3% over a year, outperforming the 1.1% gain recorded by its industry.

Zacks Rank & Stocks to Consider

CF Industries currently carries a Zacks Rank #4 (Sell).

Better-ranked companies in the basic materials space include Olympic Steel, Inc. (NASDAQ:ZEUS) , Methanex Corporation (NASDAQ:MEOH) and The Mosaic Company (NYSE:MOS) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Olympic Steel has an expected long-term earnings growth rate of 7.5%. Its shares rallied 34% over the past six months.

Methanex has an expected long-term earnings growth rate of 15%. Its shares have rallied 31% over the past six months.

Mosaic has an expected long-term earnings growth rate of 9.5%. Its shares have rallied 25% over the past six months.

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