CF Stock Hits 52-Week High: What's Driving its Performance?

Shares of CF Industries Holdings, Inc. CF scaled a new 52-week high of $104.45 before retracing to close the session at $100.74. 

The company’s shares have gained 35.9% in a year compared with the industry’s growth of 28.7%.

CF currently has a market capitalization of roughly $16.3 billion and a Zacks Rank #3 (Hold).

Let’s take a look into the factors that are driving CF stock.

What’s Aiding CF Stock?

CF Industries benefits from rising global demand for nitrogen fertilizers, which is driven by robust agricultural demand. Following the difficulties caused by the pandemic, industrial demand for nitrogen has rebounded. Global demand is expected to remain high for the foreseeable future as industrial demand increases and agriculture economics improves. High corn-planted acres and low nitrogen channel inventories are likely to drive North America's nitrogen demand. Demand for urea is also projected to remain high in Brazil as corn acres grow. Low inventories are expected to boost demand in India.

On its first-quarter earnings call, CF forecasted that the global supply-demand balance would remain favorable in the short term due to expected high demand from a global corn stocks-to-use ratio that had reached its lowest level since 2013, as well as poor production economics in Europe.

In North America, CF Industries forecasts significant nitrogen demand during the spring application season due to corn's higher returns than soybeans, resulting in larger year-over-year planted corn acres by 2025. Nitrogen imports to Brazil are predicted to remain high in 2025, owing to increased corn crops and limited local nitrogen production. Urea inventories in India are expected to be low due to rising local demand, necessitating urea imports this year to meet farmer demand and replenish reserves.

CF remains committed to increasing shareholder value by leveraging strong cash flows. The net cash generated by operational activities was $586 million in the first quarter, up roughly 32% year on year. CF Industries repurchased 5.4 million shares for $434 million during that period. The current $3 billion share buyback program had about $630 million left at the end of the first quarter. The company's board of directors approved a new $2 billion share repurchase program that will last through 2029.

Higher nitrogen prices have also increased the company's revenues. Its net sales climbed almost 13% year over year to $1,663 million in the first quarter. The average selling prices for the bulk of CF's main products rose year over year in the quarter as rising global energy costs raised the worldwide market-clearing price required to meet global demand. Moving forward, CF will likely benefit from increased pricing.

Stocks to Consider

Better-ranked stocks in the basic materials space include Carpenter Technology Corporation CRS, Alamos Gold Inc. AGI and ATI Inc. ATI.

Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 11.1%. The company's shares have soared 139.2% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Alamos Gold current-year earnings is pegged at $1.24 per share. AGI, carrying a Zacks Rank #1, surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missing twice, with the average earnings surprise being 1.4%. The company's shares have rallied 65.1% in the past year.

ATI, which currently carries a Zacks Rank #2 (Buy), beat the consensus estimate in three of the trailing four quarters while missing once. In this time frame, it delivered an earnings surprise of roughly 12.5%, on average. The company's shares have rallied 41.6% in the past year.




 

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This article originally published on Zacks Investment Research (zacks.com).

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