Shares of CF Industries (CF) reached a new 52-week high of $290.29 on Oct 7, exceeding its previous high of $281.95. The stock pulled back to end the trading session at $282.76 on that day.
The fertilizer maker, which has a market cap of around $14 billion, has seen its shares rise roughly 23% so far this year. Average volume of shares traded over the last three months is around 732.9K. The company’s long-term projected EPS growth is around 9.4%.
What's Driving CF Up?
CF Industries, a Zacks Rank #3 (Hold) stock, is enjoying the benefit of abundant natural gas (a major feedstock in producing nitrogen fertilizer) supply, driven by increased production of shale gas in North America. It should also gain from healthy U.S. corn plantations. More than 90 million acres of corn are expected to be planted next year, thereby driving the demand for nitrogen.
CF Industries also remains on track with its capacity expansion projects in Louisiana and Iowa. Both projects are expected to expand the company’s production capacity by 25%. CF Industries plans to spend roughly $1.7 billion on capacity expansion projects this year.
Moreover, the acquisition of Viterra Inc.'s 34% interest in the Medicine Hat nitrogen facility underscores CF Industries’ strategy to invest in lucrative projects. Following the acquisition, the company’s annual marketable nitrogen volume rose by roughly 270,000 net tons of ammonia and 275,000 tons of urea.
CF Industries also remains committed to return value to shareholders and invest in growth initiatives. The company, in Aug 2014, announced a 50% hike in its quarterly dividend and an additional $1 billion share repurchase program.
CF Industries, last month, confirmed that it is in talks with Norwegian fertilizer maker Yara International ASA (YARIY) for a potential merger that would result in the creation of a global fertilizer giant.
The merger, if eventually materialized, would create a fertilizer powerhouse with complementary businesses. The integrated entity would become the world’s largest nitrogen fertilizer maker with annual sales of roughly $19 billion. The deal will allow CF Industries to expand into overseas markets.
That said, CF Industries remains exposed to pricing pressure. Lower prices for major nitrogen products are hurting sales and margins in the company’s nitrogen business. Nitrogen prices remain under pressure, partly due to higher Chinese exports.
Other Stocks to Consider
Other fertilizer companies worth considering are Intrepid Potash, Inc. (IPI) and The Scotts Miracle-Gro Company (SMG), both holding a Zacks Rank #2 (Buy).
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