CF - Embedded Expectations Analysis - 2021 06 23
CF Industries Holdings, Inc. (CF:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 20.1x Uniform P/E. Even at these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about global energy and chemicals pricing, low inventory levels, and debt reductionSpecifically, management may lack confidence in their ability to improve overall margins, maintain an investment grade credit rating, and further reduce debt. Furthermore, they may have concerns about the impact of low domestic production in India, declines in anthracite-based production costs in China, and the pace of their inventory replenishment. Moreover, management may be exaggerating their ability to capitalize on the favorable global energy pricing environment and realize UAN's price increases, and they may have concerns about pandemic-related headwinds
CF Industries Holdings is a global fertilizer and chemical company. The company's principal nitrogen fertilizer products are anhydrous ammonia, granular urea, urea ammonium nitrate solution and ammonium nitrate. The company's other nitrogen products include diesel exhaust fluid, urea liquor, nitric acid and aqua ammonia, which are sold primarily to its industrial customers, and compound fertilizer products, which are solid granular fertilizer products for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. The company serves its customers in North America through its production, storage, transportation and distribution network.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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