Here's Why You Should Hold Onto CF Industries (CF) Stock Now
Zacks Investment Research | Mar 22, 2020 10:47PM ET
CF Industries Holdings, Inc. (NYSE:CF) is poised to benefit from higher nitrogen fertilizer demand and lower natural gas costs amid headwinds from weak product prices.
Shares of the fertilizer maker are down 43.8% over a year, compared with 47.4% decline of its industry .
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Working in CF’s Favor?
CF Industries is expected to benefit from higher nitrogen fertilizer demand in major markets in 2020. The company expects global nitrogen demand to be positive over the near term as application seasons develop in different regions globally. In North America, crop futures and an expected return to traditional planting conditions in the region are projected to support a rise in nitrogen-consuming planted corn acres in 2020 on a year-over-year basis.
CF Industries expects demand for nitrogen in North America to be strong in the spring application season after a weak fall application season due to bad weather. In North America, farmers are expected to plant roughly 92-94 million acres of corn in 2020, per the company.
The company also envisions demand to remain strong in India this year. It also sees demand in Brazil to be favorable in 2020, backed by reduced domestic urea production and additional planted corn acres.
Low natural gas costs also have been an advantage for CF Industries. The company is enjoying the benefits of access to low cost and abundant North American natural gas supply. It saw lower year-over-year natural gas costs in 2019, supporting its financial performance. The company expects natural gas cost advantage to continue in 2020, especially in the first half.
The company remains committed to return value to shareholders leveraging strong cash flows. CF Industries generated operating cash flows of roughly $1.5 billion and free cash flow of $915 million in 2019. It also returned roughly $602 million to shareholders through dividend and share buybacks last year. Moreover, the company is currently executing a $1 billion share repurchase program that is authorized through 2021.
Weak Pricing A Concern
CF Industries faces headwinds from lower nitrogen prices. The company saw lower prices across all major products in the last reported quarter, hurting its revenues.
Get The News You Want
Prices were affected by greater global supply availability due to increased global operating rates. Moreover, lower global energy prices put pressure on product prices. The company expects pricing weakness to continue through the first half of 2020. As such, lower year over year product prices are expected to continue to weigh on its results.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.