CF Industries (CF) delivered $6.87 per share in the second quarter, striding ahead of the Zacks Consensus Estimate of $5.94. Management is expecting farm income to set a new record this year, and believes that farmers are going to plan a very large corn planting next year.
The company expects the corn stocks-to-use ratio to remain in the mid-single-digits for the 2011 marketing year, supporting elevated corn prices. This should provide growers with a compelling incentive to reinvest some of their harvest income in crop inputs.
CF Industries has a good forward order book with attractive margins. We therefore upgrade our recommendation to Outperform from Neutral and have increased the target price to $210.00 from $154.00.
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