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Key Takeaways from CF Industries’ Strong Second-Quarter Results

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Dec. 4 2020, Updated 10:52 a.m. ET

CF Industries’ earnings

CF Industries (CF) reported strong second-quarter earnings. After releasing results, the stock popped about 3.8% in the after-hours market session to $45.8 per share. The company managed to beat both top-line and bottom-line estimates during the quarter.

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The details

CF Industries reported sales of $1.3 billion, which beat analysts’ estimate of $1.2 billion. Year-over-year, the company’s sales rose 16%, which also trickled down to gross margins. Gross margins expanded to 24% from 15% a year ago. The company reported strong EBITDA (earnings before interest, tax, depreciation, and amortization) of $470 million, resulting in an EBITDA margin of 36% from 27% a year ago.

Higher average selling prices for fertilizers and an increase in shipment volumes led to an increase in sales during the quarter. The average selling prices increased due to higher energy prices outside the US. Natural gas prices at Henry Hub were $2.82 per MMBtu (million British thermal units) compared to $7.34 per MMBtu at the National Balancing Point in the UK. In addition, a slowdown in China’s nitrogen production served as a tailwind to nitrogen prices during the quarter.

Strong quarter

The second quarter was good for CF Industries, as it continued to reap the benefits of higher fertilizer prices along with low natural gas costs in the US. An increase in shipment volume also indicates the strength in overall demand, which usually benefits companies (MOO) including CVR Partners (UAN), Nutrien (NTR), and Mosaic (MOS). Overall, the company’s net margin grew to 11.4% from just about 27 basis points a year ago.

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