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TheStreet Open House

Why CF Industries (CF) Is Gaining Today

NEW YORK (TheStreet) -- CF Industries (CF) was gaining 7.8% to $243.89 on after the company's fourth-quarter earnings and revenue beat analysts' expectations.

CF Industries said profit fell to $5.71 a share from $7.40 a share a year earlier. Analysts surveyed by Thomson Reuters estimated earnings of $4.49 a share for the quarter.

Revenue fell 3.6% to $1.33 billion, but topped estimates of $1.26 billion for the quarter.

The company saw a 4% drop in sales in its nitrogen segment, which produces the most revenue, due to lower selling prices. Phosphate sales were down 42% in the quarter, and were hurt by lower selling prices and volume.

Must read: 3 Stocks Dragging In The Chemicals Industry

TheStreet Ratings team rates CF INDUSTRIES HOLDINGS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about its recommendation:

"We rate CF INDUSTRIES HOLDINGS INC (CF) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its expanding profit margins, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 44.32% is the gross profit margin for CF INDUSTRIES HOLDINGS INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CF's net profit margin of 21.34% significantly outperformed against the industry.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CF's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.83 is very high and demonstrates very strong liquidity.
  • The revenue fell significantly faster than the industry average of 13.5%. Since the same quarter one year prior, revenues fell by 19.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Chemicals industry and the overall market, CF INDUSTRIES HOLDINGS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CF Ratings Report

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