Analyst Note| Seth Goldstein, CFA |
CF reported solid first-quarter results even after being impacted by the February winter storm that limited natural gas availability and raised natural gas prices. Adjusted EBITDA grew 25% as higher nitrogen prices overcame lower volumes and higher unit production costs. Despite the storm reducing first-quarter volumes, management maintained its outlook for 19-19.5 million product tons for the year. Given the multi-year high corn prices, we think farmers will plant more corn this year, and CF will make up the volumes over the rest of the year. Additionally, we increased our near-term nitrogen price forecast to account for higher demand. Having updated our model to reflect these changes, we raise our CF fair value estimate to $55 per share from $48. Our no-moat rating is unchanged. We view CF as fairly valued at current prices, with shares trading slightly below our fair value estimate in 3-star territory.