UPDATE: UBS Initiates Coverage on CF Industries

In a note released Thursday morning, UBS analyst Brian MacArthur initiated coverage on, fertilizer manufacturer, CF Industries Holdings, Inc. with a Neutral rating and announced a $268 price target. MacArthur wrote, "With the recent sale of its entire phosphate mining & manufacturing business to Mosaic, CF has become a nitrogen fertilizer pure play," he continued, "we believe CF is well-positioned to execute its growth plans, to continue buying back shares and to potentially increase capital returns in the longer-term." MacArthur noted that despite global nitrogen capacity being expected to out pace incremental demand by approximately 4 percent through 2017, North America is expected to have net imports. Furthermore, he sees CF's premium regional pricing and feedstock cost advantage as providing downside production. looking to 2015, MacArthur expects the company's free cash flows to be negative due to expansion projects, but he believes as the company nears the completion of these projects the stock could warrant a re-rate. Moreover, he sees free cash flows exceeding $1.4 billion in 2016 based on new production and "relatively flat pricing".