CF Industries Holdings, Inc. CF reported second-quarter 2024 earnings of $2.30 per share, down from $2.70 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.80.

Net sales fell around 11.4% year over year to $1,572 million in the quarter, missing the Zacks Consensus Estimate of $1,580.2 million.

Average selling prices in the second quarter were lower year over year due to a fall in global energy costs, which reduced the global market clearing price required to meet demand. Sales volumes were down from the prior-year period as lower ammonia, Urea Ammonium Nitrate (UAN) and Ammonium Nitrate (AN) sales volumes more than offset higher 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

Segment Review

Net sales in the Ammonia segment decreased 22.1% to $409 million in the reported quarter, missing our estimate of $430.1 million. Ammonia adjusted gross margin per ton fell in the first half of 2024 from the 2023 number, mostly due to lower average selling prices and increased maintenance expenses, which were slightly offset by lower realized natural gas costs.

Sales in the Granular Urea segment fell 0.6% year over year to $457 million, topping our estimate of $454.4 million. Granular urea adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, owing primarily to lower average selling prices and the impact of purchased volumes of granular urea to satisfy customer commitments, which was somewhat offset by reduced realized natural gas costs.

Sales in the UAN segment fell around 13.3% year over year to $475 million, missing our estimate of $508.2 million. UAN adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, mainly due to lower average selling prices offset by lower realized natural gas costs.

Sales in the AN segment fell around 5.8% year over year to $98 million, beating our estimate of $94.7 million. AN adjusted gross margin per ton declined in the first half of 2024 from the 2023 figure, owing primarily to lower average selling prices, which were partially offset by lower maintenance and realized natural gas expenses.

Financials

As of Jun 30, 2024, CF Industries’ cash and cash equivalents were $1,819 million, down 43% year over year. Long-term debt was $2,970 million, stable year over year.

Net cash provided by operating activities was $475 million in the reported quarter, down nearly 33.3% year over year.

The company repurchased 8.3 million shares for $652 million in the first half of 2024, including 4 million shares for $305 million in the second quarter of 2024.

Outlook

Per CF, from the end of the second quarter of 2024 into the third quarter, gas curtailments in Egypt and Trinidad, combined with scheduled outages and a lack of significant urea export availability from China, have supported global nitrogen pricing during a time of year when prices and global shipments typically fall as demand shifts from the Northern Hemisphere to the Southern Hemisphere. 

For the near term, management anticipates that the global supply-demand balance will remain positive, driven by nitrogen import requirements for Brazil and India until the end of the year, as well as sustained wide energy spreads between North America and high-cost production in Europe.

Price Performance

Shares of CF Industries have declined 11.4% in the past year compared with a 31.8% fall of the industry.

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Zacks Rank & Key Picks

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

Better-ranked stocks worth a look in the basic materials space include Barrick Gold Corporation GOLD, Franco-Nevada Corporation FNV and Avino Silver & Gold Mines Ltd. ASM.

Barrick is slated to report second-quarter results on Aug 12, before market open. The Zacks Consensus Estimate for its second-quarter earnings is pegged at 26 cents. GOLD beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 18.3%. GOLD currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franco-Nevada, carrying a Zacks Rank #1, is slated to report second-quarter results on Aug 13. The Zacks Consensus Estimate for FNV's second-quarter earnings is pegged at 78 cents. FNV beat the consensus in the last four quarters, with the average earnings surprise being 10.5%.

Avino Silver, carrying a Zacks Rank #1, is slated to report second-quarter results on Aug 13. The Zacks Consensus Estimate for ASM's second-quarter earnings is pegged at 2 cents. The stock has surged nearly 22.8% in the past year. 

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