CF Industries Holdings, Inc. - Momentum

CF Industries Holdings, Inc. (CF) continues to trade strong, recently hitting a new multi-year high at $149.65 as agriculture prices remain in elevated territory. With a bullish growth projection and discounted valuation, this Zacks #1 rank stock is a solid momentum player.

Company Description

CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate in North America and various global markets. The company was founded in 1946 and has a market cap of $9.5 billion.

With key agriculture commodities trading in elevated territory, agriculture companies are producing big gains, That dynamic was on display in mid November when CF reported strong Q3 results that easily beat expectations.

Third-Quarter Results

Revenue for the period was up 113% from last year to $917 million, driven by the company's acquisition of industry competitor Terra Industries in April. When stripping out one-time items earnings came in at $1.10, a nice improvement from last year's 78 cents but short of the Zacks Consensus Estimate of $1.41.

The company noted that rising global grain prices and tightening fertilizer supply/demand forces drove a sharp increase in prices. Nitrogen in particular was strong, helped by a severe shortage in wheat that was triggered by Russia banning exports after a heat wave crippled production.

The company also expressed a confident tone about the future, saying it expects demand to remain robust on a wide fall planting window and higher corn production.

Financial Profile

CF had to take on some debt to acquire Terra, with its total debt load up sharply to $2.26 billion. Its cash position was also on the rise, with cash and equivalents up $153 million from last year to $648 million.

Estimates

We saw some pretty big movement in the next-year estimate off the good quarter, increasing more than 33% to $12.49, a bullish 69% growth projection. The current-year estimate is pegged at $7.40.

Valuation

But in spite of the nice gains, CF still has value, trading with a forward P/E of 11X, a sharp discount to its peers 19X.

12-Month Chart

On the chart, it's been almost a straight shot higher for the last 6 months, with shares recently hitting a new multi-year high at $149 before pulling back a bit. The stochastic below the chart is signaling that shares are emerging from over-sold territory. Look for support from the long-term trend on any weakness. Take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
CF INDUS HLDGS (CF): Free Stock Analysis Report
 
Zacks Investment Research