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CF Industries (CF) Earnings and Sales Surpass Estimates in Q1

CF Industries Holdings, Inc. CF reported a profit of $560 million or $2.85 per share in the first quarter of 2023, down from $883 million or $4.21 per share in the year-ago quarter. Earnings per share  surpassed the Zacks Consensus Estimate of $2.63.

Net sales fell 29.8% year over year to $2,012 million in the quarter. The figure topped the Zacks Consensus Estimate of $1,893.7 million. The downside was driven by lower average selling prices due to higher worldwide supply availability, as lower global energy costs led to higher global operating rates.

Sales volumes were also down year over year in the reported quarter, owing to lower UAN, ammonia and AN sales volumes. This was partly offset by higher granular urea sales volumes.

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

 

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

Segmental Review

Net sales in the Ammonia segment fell 33.8% year over year to $424 million in the reported quarter. Sales volume decreased from the prior year on lower demand. Average selling prices in the quarter declined year over year on higher global supply availability as lower global energy costs led to increased global operating rates.

Sales in the Granular Urea segment fell 20.1% year over year to $611 million. Sales volume increased due to greater supply availability from increased production. Average selling prices for urea decreased on a year-over-year basis.
 
Sales in the UAN segment declined 34.3% year over year to $1,015 million. Sales volume and average selling price decreased in the quarter from the prior year’s levels.

Sales in the AN segment declined 28.7% year over year to $159 million. In the first quarter, sales volumes were down year over year on lower supply availability from lower production in the U.K. Average selling prices fell on a year-over-year basis.

Financials

CF Industries’ cash and cash equivalents were $2,825 at the end of the quarter, up from $2,617 reported in the prior-year quarter. Long-term debt was $2,966 million at the end of the quarter, flat year over year.
Cash flow from operations was $947 million for the reported quarter, down from the $1,391 million reported in the prior year.

The company repurchased more than 1 million shares for $75 million in the first quarter.

Outlook

Moving forward, CF industries anticipates production economics in Europe to remain difficult. Full ammonia capacity production rates are not expected to resume in the region in 2023, with some facilities continuing to prefer importing ammonia in order to make enhanced products.  

Under present measures, CF expects urea exports from China to be 2-3 million metric tons in 2023, with annual exports returning to 3-5 million metric tons if government export restrictions are relaxed.

Energy disparities between North America and marginal producers in Europe and Asia are expected to be significantly higher than historical levels. The company anticipates the global nitrogen cost curve to continue to favor low-cost North America producers with considerable margin potential.

Price Performance

Shares of CF Industries have lost 25.4% in the past year compared with a 30% fall of the industry.

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Zacks Investment Research
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Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the basic materials space are Gold Fields Limited GFI, Steel Dynamics STLD, and Alamos Gold Inc. AGI. GFI currently flaunts a Zacks Rank #1 (Strong Buy), while STLD and AGI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gold Fields’ fiscal 2023 earnings per share is pegged at $1.01. Earnings estimates have moved 6.3% north in the past 60 days. GFI has a trailing four-quarter earnings surprise of 7.7%, on average. Its shares have gained 15.8% in the past year.

The Zacks Consensus Estimate for Steel Dynamics’ earnings per share is pegged at $15.99 for 2023. Earnings estimates have been revised 37% upward in the past 60 days. STLD has a trailing four-quarter average surprise of 10.7%, on average. The company has gained 24.9% in a year.

The Zacks Consensus Estimate for Alamos Gold’s earnings per share is pegged at $0.47 for 2023. Earnings estimates have been revised 14.6% upward in the past 60 days. AGI has gained 72.1% in a year.

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