Bullish indicating open at $55-$60, IPO prices at $37
Investing.com - Wells Fargo (NYSE:WFC) raised its price target on CF Industries (NYSE:CF) to $108.00 from $101.00 on Monday, while maintaining an Overweight rating on the fertilizer producer’s shares. According to InvestingPro data, the stock currently trades at $80.91 and appears undervalued based on its Fair Value analysis.
The investment bank noted that CF Industries’ second-quarter results were impacted by unplanned turnarounds and higher SG&A costs, which Wells Fargo expects will reverse in the second half of the year, although third-quarter results will be affected by planned turnarounds.
Wells Fargo highlighted that CF Industries delayed its summer fill for UAN (urea ammonium nitrate) due to low inventory, which should allow the company to realize higher prices in the third quarter as reflected in spot prices.
The new price target is based on a 2026 estimated EV/EBITDA multiple of 7.5x, which sits at the low end of CF Industries’ 10-year historical average multiple range of 7.0-10.0x, and represents a 20% discount to Wells Fargo’s discounted cash flow valuation of $124. The company currently trades at an EV/EBITDA of 6.29x and a P/E ratio of 10.63, with an attractive free cash flow yield of 14%. InvestingPro analysis reveals 12+ additional key metrics and insights available to subscribers.
Wells Fargo believes risks are skewed to the upside for CF Industries given positive nitrogen fundamentals, strong free cash flow and share buybacks, higher global energy costs, and the company’s clean energy project pipeline. Management has been actively returning value to shareholders through aggressive share buybacks and maintaining a 2.47% dividend yield.
In other recent news, CF Industries Holdings Inc reported its second-quarter financial results, revealing a mixed performance. The company’s earnings per share were $2.37, which fell short of the analyst consensus of $2.40. Despite this earnings miss, CF Industries saw its revenue exceed expectations, reaching $1.89 billion. This figure not only surpassed the consensus estimate of $1.78 billion but also represented a 20% increase from the $1.57 billion recorded in the same quarter the previous year. These developments highlight the company’s ability to grow its revenue significantly, even as earnings came in slightly below projections. Investors and analysts may be keen to understand the factors contributing to this revenue growth and the slight earnings shortfall.
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