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CF Industries (CF) Shares Up 45% YTD: What's Driving the Stock?

CF Industries Holdings, Inc.’s CF shares have gained 44.8% so far this year. The company has also outperformed its industry’s rise of 26.8% over the same time frame. Moreover, it topped the S&P 500’s 20.6% decline over the same period.

Let’s take a look into the factors behind this Zacks Rank #3 (Hold) stock’s price appreciation.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

What’s Driving CF?

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.

The company, on its second-quarter call, said that it sees the global nitrogen supply-demand balance to remain tight for the foreseeable future, supported by resilient agricultural-led demand and uncertainty about global production and export supply availability. Energy spreads between low-cost producers and marginal production in Europe and Asia also expected to remain historically wide.

CF Industries expects nitrogen demand for industrial use in North America to be supported by mining activity. It also envisions India to tender on a regular basis into 2023 as higher domestic production is unlikely to fully meet increased demand as growers boost grain production. The company also envisions urea consumption in Brazil to remain strong this year, backed by high crop prices, expected high planted corn acres and improved farm incomes.

The company is also benefiting from higher nitrogen prices on the back of lower supply resulting from reduced operating rates globally 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 and geopolitical factors.

CF Industries also remains committed to boosting shareholders’ value by leveraging strong cash flows. Its net cash provided by operating activities was $889 million for the second quarter, up nearly seven-fold year over year. The company repurchased around 6.6 million shares for $590 million during the first half of 2022.

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

Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Brigham Minerals, Inc. MNRL and Sociedad Quimica y Minera de Chile S.A. SQM.

Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 426.7% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 22.1% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 25% in a year.

Brigham Minerals, currently carrying a Zacks Rank #1, has an expected earnings growth rate of 150.9% for the current year. The consensus estimate for MNRL's earnings for the current year has been revised 7.8% upward in the past 60 days.

Brigham Minerals’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 13.9%. MNRL has gained around 38% over a year.

Sociedad has a projected earnings growth rate of 530.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 18.8% upward in the past 60 days.

Sociedad has a trailing four-quarter earnings surprise of roughly 27.2%. SQM has rallied roughly 80% in a year. The company carries a Zacks Rank #2 (Buy).


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