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What the Future Could Hold for CF Industries Stock

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Jun. 11 2018, Updated 2:19 p.m. ET

CF Industries

CF Industries (CF), one of the major nitrogen producers in North America, has had a bumpy ride since 2015 when the company saw a sharp decline in its return on equity. Little did investors know that it was about to get worse. The stock reached a peak of $70.3 in July of 2015 and then a low of $20.8 on August 2016, falling almost 70% over this period.

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Earnings and share price

The company’s stock price took a dive in anticipation of a weaker outlook, which negatively impacted earnings in the following quarter. In the above chart, we see how the company’s EPS (earnings per share) fell in each quarter and was turning negative towards the end of 2016. The company experienced losses, and the stock price took a beating.

The background

CF Industries operates in a highly cyclical industry (MOO), and its earnings suffered due to falling commodity prices. Peers such as CVR Partners (UAN), Intrepid Potash (IPI), and PotashCorp (POT), which has consolidated with Agrium (AGU) to form Nutrien (NTR), have also been affected.

Looking ahead

CF Industries has reported positive normalized EPS year-over-year as well as sequentially. And on June 7, the stock closed at $42.8, which is almost double the low observed in August 2016. Fertilizer prices appear to be turning the corner. With that said, let’s look at what the future could hold for CF Industries.

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