Wednesday, February 9, 2011

CF Industries Holdings, Inc. (NYSE: CF): Q4 Earnings Preview 2010

CF Industries Holdings, Inc. (NYSE: CF) is scheduled to release its fourth-quarter financial results after the closing bell on Thursday, February 17, 2011. Analysts, on average, expect the company to report earnings of $2.58 per share on revenue of $1.20 billion. In the year ago quarter, the company reported earnings of 89 cents per share on revenue of $506.70 million.

CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate fertilizer products in North America and export markets. The Company operates in two segments: the nitrogen segment and the phosphate segment.

The company's customers are primarily farm cooperatives and fertilizer distributors in the U.S. Its product mix is heavily weighted toward nitrogen fertilizer products, which accounted for 80% of total sales and 83% of gross profit in the third quarter of 2010.

In the preceding third quarter, the Deerfield, Illinois-based company's third quarter net income was $48.2 million, compared to $38.5 million in the prior-year quarter. On a per share basis, net income declined to $0.67 from $0.78 in the previous year, on substantially higher share count for the quarter. Weighted average common shares outstanding for the quarter was 71.9 million, compared to 49.3 million last year. Revenue rose to $917.1 million from $430.1 million in last year period. Analysts, on average, expected the company to report earnings of $1.43 per share on revenue of $979.66 million.

At its last earnings call in November, the company expressed a confident tone about the future, saying it expects demand to remain robust on a wide fall planting window and higher corn production. The company said that the outlook for nitrogen and phosphate fertilizers, its two main product units, is "very favorable."

Fertilizer demand continues to strengthen and market segment sentiment has improved due to the rally in grain prices, lean producer inventories and the need to refill a de-stock pipeline.The broad-based rally in agricultural commodity prices translates into profitable farm economics and record or near-record farm income around the world. Rallies in a broad array of agricultural commodity prices during the last few months are fueling an increasingly positive outlook for phosphate and potash demand. Phosphate prices have increased sharply. Growth in China, India, Brazil and other emerging areas around the globe are creating demand. An improving agricultural picture, visibility with pricing, and the fear of inflation could all boost fertilizer stocks higher.

Another favorable condition for the company has been the increase in natural gas production from shale plays, which has worked to keep gas prices low in the U.S. Since natural gas accounts for over 50% of the company’s manufacturing costs for nitrogen fertilizer, this has been a tailwind for the company.

Full Disclosure: None.
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