Miller Tabak Raises Price Target On CF Industries Holdings

Miller Tabak + Co raised its price target on CF Industries Holdings, Inc. CF from $240 to $275 ahead of its Q4 earnings release on Wednesday. The firm maintained a Hold rating.

Analyst Tim Tiberio raised the Q4 EPS estimate from $4.95 to $5.05 based on “lower natural gas input costs in December and a modest rally in spot urea prices in mid Q4:14.” Tiberio noted, however, that the firm is below the consensus estimate of $5.08.

The firm also raised FY 2015 estimates from $19.04 to $22.10 due to a decline in natural gas costs. Tiberio commented that “90 percent of CF’s natural gas costs are hedged with collars between $3.41 and $4.25 through March, 2015.”

The firm also released FY 2016 estimates for revenue at $4.79 billion with EPS of $23.98, below estimates of $26.68 EPS due to anticipated increases in natural gas prices and price pressure on ammonia.

The analyst note suggested that downside risk could be seen in the near term if global pricing falls. Tiberio saw a 6 to 8 percent downside risk in the stock following the "recent natural gas-fueled rally." Tibero added that "if natural gas futures bounce on this week’s cold front, we could see traders starting to question whether applying a 14x times to FY:15 consensus vs. 12-13x makes sense if ‘spot’ margins begin to contract.”

For the Q4 earnings call, the analyst felt that the market will focus on expansion projects and capex timing and costs.

The $275 price target was derived by applying a forward multiple of 11.5 times to the firm’s FY 2016 estimates.

CF Industries Holdings, Inc. recently traded at $297.87, down 1.17 percent.