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CF Industries Pops on Price Upgrade from RBC

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RBC upgrades CF Industries

Today, RBC upgraded CF Industries (CF) from its “underperform” rating to “sector perform.” RBC analyst Andrew Wong cited a favorable energy environment and the company’s financial position as two reasons for the upgrade, according to Reuters.

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The consensus recommendation

The consensus recommendation for CF Industries was a “hold” as of July 18 with 11 analysts recommending a “hold” on the stock. This month, one analyst continued recommending a “strong buy.” Compared to five analysts last month, six analysts recommend a “buy” on the stock this month. Consequently, two analysts recommend a “sell,” down from three a month ago.

Price target raised

RBC also raised its price target on CF Industries from $38 to $42, representing a 10% increase in price target. The consensus price target for CF Industries stood at $44 as of July 18. CF Industries hit a high of $43.6 and continued to trade above RBC’s price target.

RBC noted that higher oil prices increase the cost curve while lower natural gas prices in the United States keep input costs down. A higher cost curve leads to higher realized selling prices a while lower input cost lowers the cost of production, which should eventually lead to margin expansion. However, Wong also noted that the nitrogen market has excess supply, resulting in range-bound prices for nitrogen fertilizer.

Also today, Nutrien (NTR) was up by 17 basis points, Mosaic (MOS) was up by 72 basis points, and CVR Partners (UAN) declined by 240 basis points.

To learn more, visit Market Realist’s fertilizer sector (MOO) page.

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