Brett Wong of Piper Jaffray upgraded shares of CF Industries Holdings, Inc. CF on Monday to Overweight from Neutral with a price target raised to $327 from a previous $271.
According to Wong, nitrogen nutrient fundamentals appear to be favorable in 2015 and CF Industries is poised to benefit from higher capacity and an improved free cash flow in fiscal 2016. The analyst adds that expectations are strong for corn planting in the U.S., further supporting strong demand for nitrogen, especially urea and UAN as farmers move to dry application and more side-dress.
Wong adds that the recent decline in natural gas prices over the past month suggests ongoing lower prices, providing “significant upside” to his model. In addition, the company's profile will improve as capacity expansion projects come online.
Wong also states that the company's capital expenditure is set to decline “significantly” by 2016 and improve its free cash flow profile. As such, management will continue deploying capital to investors through share buybacks, which is the preferred method of generating shareholder value.
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