Will CF Industries’ 1Q16 Sales Dip Linger throughout 2016?




Unlike Israel Chemicals (ICL), Mosaic (MOS), Intrepid Potash (IPI), Agrium (AGU), and CF Industries (CF) primarily produces nitrogen fertilizers. This segment combines sales from ammonia, urea, UAN, and other segments, including ammonium nitrate, urea liquor, diesel exhaust fluid, and aqua ammonia.

The VanEck Vectors Agribusiness ETF (MOO) invests 30% of its holdings in agricultural chemicals companies such as those mentioned above.

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Revenue expectations

For the upcoming 1Q16 earnings release, Wall Street analysts are expecting CF to report revenue of $853 million, which would be 11% lower than the $953 million in 1Q15. For fiscal 2016, analysts are forecasting that the company will report revenue of $4.4 billion, an increase from $4.3 billion in 2015. This forecast would mean revenue growth of 4.2% year-over-year. So, while the sales are estimated to dip in 1Q16, they should rise in 2016.

In 2015, CF Industries earned about 35.4% of its revenue from ammonia sales. Ammonia is the primary nitrogen fertilizer, which is then upgraded to urea, UAN (urea ammonium nitrate), and other nitrogen fertilizers.

Fertilizer prices

Revenue for CF Industries (CF) is a function of average realized prices for fertilizer and shipments. Ammonia prices have picked up recently in the US Cornbelt region raising expectations for the company’s ammonia segment’s performance.

Similarly, there has been an uptick in urea (granular) prices in the Cornbelt, which is positive for fertilizer companies mentioned above.


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