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Why You Should Add CF Industries (CF) Stock to Your Portfolio

CF Industries Holdings, Inc.’s CF stock looks promising at the moment. It is benefiting from healthy demand for nitrogen fertilizers and higher nitrogen prices.

We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.

CF Industries currently has a Zacks Rank #2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let's see what makes this fertilizer maker an attractive investment option at the moment.

Price Performance

Shares of CF Industries have shot up 64.8% over a year against the 39.6% rise of its industry. It has also outperformed the S&P 500’s roughly 11% decline over the same period.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Estimates Going Up

Over the past two months, the Zacks Consensus Estimate for CF Industries for 2022 has increased around 15.5%. The consensus estimate for second-quarter 2022 has also been revised 12.5% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Solid Growth Prospects

The Zacks Consensus Estimate for earnings for the current year for CF Industries is currently pegged at $18.95, reflecting an expected year-over-year growth of 346.9%. Moreover, earnings are expected to register an 438.6% growth in the second quarter of 2022.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for CF Industries is 35%, above the industry’s level of 23.1%.

Capital Allocation

CF Industries remains committed to boosting shareholders’ value by leveraging strong cash flows. It generated cash flow from operations of $1,391 million in the first quarter, up around 141% year over year. The company repurchased around 1.3 million shares for $100 million during the quarter. Its board also raised its quarterly dividend by 33% to 40 cents per share.

Upbeat Prospects

CF Industries is gaining from strong nitrogen fertilizer demand. Global demand for nitrogen is expected to remain strong in 2022. Higher crop commodity prices are contributing to healthy demand globally. Industrial demand has also recovered from the pandemic-related disruptions. In 2022, demand for nitrogen is expected to be driven by favorable industrial and economic activities and high levels of corn planted acres in the United States. Demand for urea imports from Brazil and India is also expected to be strong this year. Higher crop prices, high levels of planted corn acres and improved farm economics are likely to increase demand in Brazil.

The company, on its first-quarter call, said that it sees strong global nitrogen industry dynamics for the foreseeable future with robust global nitrogen demand along with tight nitrogen supply worldwide and wide energy differentials between North America and marginal production in Europe and Asia.

The company is also benefiting from higher nitrogen prices on the back of lower supply resulting from reduced operating rates across Europe and Asia due to higher energy prices. Higher nitrogen prices are driving its sales as witnessed in the last-reported quarter. The positive pricing environment is expected to continue moving ahead. Global nitrogen supply is expected to remain challenged due to higher energy prices in Europe and Asia along with export restrictions across certain countries.

 

CF Industries Holdings, Inc. Price and Consensus

 

CF Industries Holdings, Inc. Price and Consensus
CF Industries Holdings, Inc. Price and Consensus

CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nutrien Ltd. NTR, Cabot Corporation CBT and Allegheny Technologies Inc. ATI.

Nutrien, sporting a Zacks Rank #1, has an expected earnings growth rate of 174.6% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 22.9% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has gained roughly 36% in a year.

Cabot, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 6% upward in the past 60 days.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 12% over a year.

Allegheny has a projected earnings growth rate of 1,076.9% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 40.4% upward in the past 60 days.

Allegheny’s earnings beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI has gained around 7% in a year and currently sports a Zacks Rank #1.


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