CF Industries’ (CF) revenues come from its AN (ammonia nitrate), Granular Urea, UAN (urea ammonia nitrate), Ammonia, and Other 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 segments. Now, let’s look at analysts’ sales estimates for 1Q17.
For the upcoming 1Q17 release, analysts estimate CF Industries to report ~$1.01 billion, which would grow ~1% year-over-year compared to ~$1.00 billion in 1Q16.
For the next four quarters, the company’s sales are estimated to come in at ~$4.2 billion, which would grow 15% compared to ~$3.7 billion in the recent four quarters.
What impacts sales?
In 2016, sales had declined ~14% year-over-year as a result of declining nitrogen prices. While the demand for nitrogen product remains strong, not much could be said about the direction in which the fertilizer prices move. This is true especially for nitrogen producers such as CF Industries, PotashCorp (POT), CVR Partners (UAN), and Terra Nitrogen (TNH) that have natural gas as the underlying input cost.
Natural gas, which accounts for about two-thirds of the cost of nitrogen production, can be volatile, impacting the profitability of the above players (XLB).
In the next two parts, we’ll discuss profitability for CF Industries.