Free cash flow
In the previous part of this series, we looked at estimates for capital expenditures for CF Industries (CF). What’s left after capital expenditures is known as free cash flow (or FCF). Investors and analysts often watch free cash flow growth very closely, and it’s also used in discounted cash flow valuations.
Free cash flow estimates
For 4Q16, Wall Street analysts expect CF Industries (CF) to report ~$112.5 million in free cash flows—an improvement over its FCF of -$545.8 million in 4Q15. For the next 12 months, the company’s situation is expected to improve, as we can see in the chart above.
Analysts estimate that CF’s total free cash flow could touch $869 million, a considerable improvement over an approximate FCF of -$1.8 billion for the last four quarters.
The free cash flows for CF Industries’s peer (IYM) (SPX-INDEX) Mosaic (MOS) is estimated to fall 48.0% to $163.0 million in the next 12 months. Agrium’s (AGU) free cash flows could rise 23.0% to $579.0 million.
Analysts estimate that PotashCorp (POT) could see total free cash flows of $483.0 million in the next four quarters, which is a 3.0% rise from $467.0 million for the last four quarters.
Leftover free cash flow can be used to reduce debt, make acquisitions, and pay dividends. Next, we’ll discuss CF Industries’s valuation multiples.