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CF Industries Holdings Inc CF

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Morningstar’s Analysis

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Raising CF Industries' Fair Value Estimate to $57 on Improved Near-Term Outlook; Shares Undervalued

Seth Goldstein, CFA Senior Equity Analyst

Analyst Note

| Seth Goldstein, CFA |

CF Industries reported strong second-quarter results. Adjusted EBITDA rose 22% year on year, driven by higher nitrogen prices. We have increased our near-term nitrogen price forecasts as we expect prices will remain elevated for the remainder of 2021 and into 2022. Separately, we have increased our effective tax rate assumptions for CF to incorporate our updated U.S. corporate tax rate forecast. Having updated our model to reflect these changes, we raise our fair value estimate for CF to $57 per share from $55. Our no-moat rating is unchanged. At current prices, we view shares as undervalued, with the stock trading in 4-star territory.

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Company Profile

Business Description

CF Industries is a leading producer and distributor of nitrogen fertilizers. The company operates seven nitrogen facilities in North America and holds joint-venture interests in further production capacity in the United Kingdom and Trinidad and Tobago. CF makes nitrogen primarily using low-cost U.S. natural gas as its feedstock, making CF one of the lowest-cost nitrogen producers globally. The company is also investing in carbon-free blue and green ammonia, which can be used an alternative fuel to hydrogen or as a means to transport hydrogen.

4 Parkway North, Suite 400
Deerfield, IL, 60015
T +1 847 405-2400
Sector Basic Materials
Industry Agricultural Inputs
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 3,000