Will CVR Partners Turn It Around This Earnings Season? - Analyst Blog

CVR Partners, LP (UAN) is set to release its third-quarter 2014 results before the opening bell on Oct 30.

In the last quarter, this fertilizer company had delivered a roughly 39.5% negative earnings surprise due to weak pricing and lower production levels owing to planned downtime at its fertilizer plant. Let's see how things are shaping up for this announcement.

Factors to Consider

CVR Partners delivered weak second-quarter 2014 results in Jul 2014. The company generated a net income of $17.1 million or 23 cents per share, down 51.7% from a net income of $35.4 million or 48 cents per share in the year-ago quarter.

The company reported revenues of $77.2 million in the second quarter, a decline of 13% from $88.8 million for the same quarter a year ago. Production was negatively affected in the reporter quarter as repair and maintenance work was performed at the fertilizer facility and Linde air separation unit during planned downtime. Moreover, in the fertilizer facility's ammonia plant, the waste heat boiler was replaced to resolve issues related to downtime in the first quarter.

In the second quarter, CVR Partners produced 223,400 tons of Urea Ammonium Nitrate (UAN) and 92,200 tons of ammonia compared to 91,300 tons of ammonia and 225,200 tons of UAN in the year-ago quarter.

CVR Partners expects UAN production for the third quarter in the range of 240,000 to 260,000 tons. The company expects its next major turnaround of the plant in 2015.

CVR Partners has expanded the pressure swing absorption (PSA) unit resulting in higher ammonia production and also launched its new UAN terminal in Dartmouth, KS.  Combining these two facilities will provide the company the capability to store nearly 100,000 tons of UAN and distribution facilities across the Midwest.

Earnings Whispers

Our proven model does not conclusively show that CVR Partners is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: CVR Partners has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 cents.

Zacks Rank: CVR Partners's Zacks Rank #3 (Hold) when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some other companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Scotts Miracle-Gro Company (SMG) has an Earnings ESP of +4.17% and carries a Zacks Rank #3 (Hold).

CF Industries Holdings, Inc. (CF) has an Earnings ESP of +2.06% and carries a Zacks Rank #3 (Hold).

Westlake Chemical Corp. (WLK) has earnings ESP of +2.58% and sports a Zacks Rank #3 (Hold).