Why CF Industries and CVR Partners Rose in September
In the previous part of this series, we saw how some of the major agricultural chemical stocks gained significantly over the last month. The market is forward-looking, and changes in stock prices take into account investors’ perceptions of the drivers that affect the profitability of the company or industry.
For the agricultural fertilizer industry, the changes in market drivers for fertilizers typically affect all the participants within the industry.
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In the chart above, we can see the monthly changes in analysts’ estimates for EPS (earnings per share) of three companies for fiscal 2018. In August 2017, the mean analysts’ estimates for Intrepid Potash’s (IPI) fiscal 2018 earnings stood at -$0.12 per share. IPI’s estimates were revised to flat earnings per share for September.
Intrepid Potash has gained solid momentum in 2017 year-to-date. The company’s performance comes on the back of increased sales for its water products. Continued momentum in that segment and stronger potash prices boosted the stock.
CF Industries (CF) and CVR Partners (UAN) also gained significantly over the last month. However, month-over-month, we do not see any positive change in the analysts’ estimates. These companies produce and sell nitrogen products in North America, which is a net importer of nitrogen fertilizers.
On September 10, Hurricane Irma wreaked havoc in Florida. Fertilizer players (MOO) Mosaic (MOS) and PotashCorp (POT) have locations in Florida. Imports also come into the US from Florida and other ports in the south. In our view, the disruption caused by Hurricane Irma may have a role in rising prices for CF Industries and CVR Partners.