CF Industries Earnings: Lower Nitrogen Prices and Volumes Sink Stock

CF Industries' first-quarter results reflected the continued decline of nitrogen fertilizer prices from the all-time high levels reached in mid-2022. We updated our near-term outlook for lower US natural gas prices, which is the largest component of CF's unit production costs. Separately, we reduced our 2024 volume forecast for CF due to unplanned outages at a couple of plants during the first quarter. Our near- and long-term nitrogen price forecasts are unchanged. Having updated our model to incorporate these changes and CF's first quarter results, we maintain our $85 fair value estimate and narrow-moat rating is also unchanged. Shares were down over 5% on the day. At current prices, we view CF shares as slightly undervalued, with the stock trading a little more than 10% below our fair value estimate but in 3-star territory.