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Analysts Estimate CF Industries’s Revenues Could Fall in 4Q16

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CF Industries’s revenues

CF Industries’s (CF) Sales segment includes the UAN (urea ammonia nitrate), AN (ammonia nitrate), Ammonia, and Granular Urea segments. Of these five reported segments, CF Industries earns most of its sales—about one-third—from the UAN segment, followed by the Ammonia and Granular Urea segment. Now, let’s look at analysts’ sales estimates for 4Q16.

Please read our detailed analysis in CF Industries Plants Seeds of Doubt in 2016 to learn more about the shifting trends of CF Industries’s product mix.

Analysts’ estimates

With respect to CF Industries’s (CF) upcoming 4Q16 earnings, Wall Street analysts expect the company to report total sales of $908 million from all segments. This update equates to a 19% decline in sales year-over-year (or YoY) from ~1.1 billion in 4Q15.

Although CF’s 4Q16 revenues are expected to decline year-over-year, analysts estimate that revenues for the next four quarters—including the upcoming quarter—could grow 2% YoY. Although 2% doesn’t seem to be much of a decline, it’s an improvement over the 11% YoY revenue decline for the most recent four quarters.

Drawing conclusions from CF’s peers

PotashCorp (POT) reported its 4Q16 earnings on January 26, 2017. The company sells all three major fertilizers—nitrogen, phosphorous, and potassium—and reported a 33.0% fall year-over-year in revenues for its Nitrogen segment. Although PotashCorp reported a 5% increase in nitrogen shipments, weak prices impacted its sales.

The weak price environment could also affect CF Industries and other industry (SOIL) (SPX-INDEX) players. As a result, Agrium (AGU) and Terra Nitrogen (TNH) may see declining revenues in their upcoming quarter.

Next, we’ll discuss gross margin expectations for CF Industries.

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