Market Overview

Fertilizer Producers Come Out on Top


Fertilizer producers CF Industries Holdings (NYSE: CF) and Terra Nitrogen (NYSE: TNH) rode last week's volatility, reaching a series of new 52-week highs and ending the week at $168.20 and $169.60 per share, respectively.

CF Industries saw some analysts raise their price targets on the stock following the recent second-quarter earnings report. The company's board also quadrupled its quarterly dividend to $0.40 per share. The Illinois-based chemicals company manufactures and distributes nitrogen and phosphate fertilizer products to agricultural and industrial customers worldwide. It is an S&P 500 company with a market cap of $12.1 billion.

The long-term earnings per share growth forecast is 10.9% and the return on equity is 23.6%. The dividend yield is 1.0%. The P/E ratio and the PEG ratio are in line with the industry averages. The share price rose about 15% last week and is about 25% higher than at the beginning of the year. Over that time, the stock has outperformed competitors Agrium (NYSE: AGU) and Potash (NYSE: POT) as well as the broader markets.

Terra Nitrogen, an Iowa-based producer of nitrogen fertilizer products to agricultural and industrial customers in the U.S., last week reported strong year-over-year earnings growth for the second quarter. Terra Nitrogen GP serves as the general partner of the company and is a subsidiary of CF Industries.

This $3.1 billion market cap company has a quarterly payout yield of 6.7%. Its return on equity is 97.4% and it reports no long-term debt. The 10.9 P/E ratio is less than the industry average.

The share price is more than 103% higher than a year ago, as well as up more the 8% in the past week. The stock has outperformed CF Industries and Mosaic (NYSE: MOS), as well as the broader markets, year to date.

Action Items:

Bullish: Traders interested in ETFs invested in CF Industries might want to consider the following trades:

  • Market Vectors Agribusiness ETF (NYSE: MOO) is up more than 19% in the past year.
  • Rydex S&P Equal Weight Materials (NYSE: RTM) is up more than 10% in the past year.

Bearish: Traders looking for a contrarian angle may want to consider this alternative:

  • Daily Agribusiness Bear 3x (NYSE: COWS) is up more than 6% year to date.

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Posted-In: 52-Week Highs agribusiness stocks Agrium CF IndustriesLong Ideas Short Ideas Trading Ideas ETFs


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