CF Industries Holdings, Inc. CF is expected to benefit from higher nitrogen fertilizer demand in major markets and lower natural gas costs amid headwinds from soft nitrogen prices.

The company’s shares are down 7.5% over a year compared with a 4.6% decline of its industry.

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Let’s find out why CF stock is worth retaining at the moment.

CF Stock Gains on Healthy Nitrogen Demand, Lower Gas Costs

CF Industries benefits from the rising global demand for nitrogen fertilizers, which is driven by significant agricultural demand. Industrial demand for nitrogen has also recovered from the pandemic-related disruptions. Global demand is expected to remain strong in the near future due to recovering industrial demand and farmer economics. High levels of corn planted acres and low nitrogen channel inventories are expected to drive demand for nitrogen in North America. Demand for urea is also likely to remain strong in Brazil on higher corn acres. Demand in India is expected to be driven by low inventory levels.

CF, on its fourth-quarter call, said that it anticipates global supply-demand balance to continue to be positive since inventories around the globe are considered to be below normal and production economics for the industry's marginal producers in Europe remain challenging.

The company sees average U.S. corn returns to be higher than soybeans, owing in part to rising corn prices as a result of robust corn exports and lower 2024 yield predictions, which are projected to benefit corn plantings and nitrogen demand in the region. Nitrogen imports to Brazil are likely to remain high in 2025 due to anticipated high corn plantings and ongoing minimal domestic nitrogen output. Urea inventory in India is predicted to be low due to strong domestic demand for urea, lower-than-targeted domestic urea output and lower urea import volumes in 2024 compared to 2023.

The company also stands to benefit from lower natural gas prices. It saw a decline in natural gas costs in the fourth quarter. The average cost of natural gas fell to $2.43 per MMBtu in the quarter from $3.01 per MMBtu in the year-ago quarter. The same for 2024 declined to $2.4 per MMBtu from $3.67 per MMBtu a year ago. Lower natural gas costs led to a decline in the company's cost of sales in 2024. The benefits of reduced gas costs are expected to continue in 2025.

Soft Nitrogen Prices Weigh on CF

CF is exposed to headwinds from weak nitrogen prices. Higher global supply availability driven by higher global operating rates due to lower global energy costs put pressure on nitrogen prices last year. CF’s average selling prices in 2024 were lower than in 2023 due to lower global energy costs, which reduced the global clearing price required to meet demand. It saw lower year-over-year prices across its segments in 2024. While the company is seeing improved prices lately, weaker year-over-year prices are expected to impact its results over the near term. Weak pricing is expected to weigh on its sales and margins.

CF Industries Holdings, Inc. Price and Consensus

CF Industries Holdings, Inc. price-consensus-chart | CF Industries Holdings, Inc. Quote

CF’s Zacks Rank & Other Key Picks

CF currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Axalta Coating Systems Ltd. AXTA, Ingevity Corporation NGVT and Carpenter Technology Corporation CRS. While AXTA and NGVT sport a Zacks Rank #1 (Strong Buy), CRS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Axalta Coating’s 2025 earnings is pegged at $2.55, indicating a rise of 8.5% from year-ago levels. AXTA beat the consensus estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 16.3%, on average. 

The Zacks Consensus Estimate for Ingevity’s 2025 earnings is pegged at $4.45, indicating a rise of 26.8% from year-ago levels. The consensus estimate for NGVT’s 2025 earnings has increased by 29% in the past 60 days. 

The consensus estimate for Carpenter Technology for the current fiscal year stands at $6.95, reflecting a 46.6% year-over-year increase. CRS beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 15.7%. 

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This article originally published on Zacks Investment Research (zacks.com).

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