CF Industries Holdings, Inc. (CF), one of North America’s largest manufacturers and distributors of nitrogen and phosphate fertilizers, remains a Zacks #1 Rank (Strong Buy) despite the whiplash moves in its stock price in the last 2 weeks.

The company reported record second quarter earnings on July 28 which boosted the stock price to $167 by July 30. The company was also bullish about the rest of 2008 in its earnings report.

But a sell-off in the commodities sector, and most companies in commodities-related industries such as the fertilizers, drove the stock down to as low as $123.11 on Aug 12.

CF Industries Fundamentals Remain Strong

CF’s recent stock plunge was not for the faint-of-heart but the roller coaster continues as it has again bounced to higher levels.

After this recent sell-off, CF remains an extremely cheap stock and its fundamentals remain in place. Basically, it has gone on sale. It’s trading at only 6.24x its forward earnings. That’s cheap even by industry standards which has a trailing P/E of 11.02.

Consensus Estimates Jump

Brokerage analysts continue to believe the fundamentals remain strong as well. Consensus estimates continue to rise on the company for both the third quarter and the full year.

In the last 30 days, third quarter estimates climbed 27% to $3.80 from $3.00 per share.

Full year estimates skyrocketed by 29% in the last month to $17.13 from $13.32. As an indicator of how quickly things are changing in the fertilizer sector, and how bullish the analyst outlook is, consensus estimates for full year 2009 have jumped 36.4% to $22.25 from $16.31 in just the last 90 days.

CF Continues To Surprise to the Upside

Despite earnings increases by analysts over the course of the prior quarters, CF continues to beat consensus estimates. The company surprised by 15.17% in the second quarter. That surprise came on the heels of 3 consecutive prior surprises. The company has beaten Wall Street estimates by an average of 28.73% the last four quarters.

Given the pricing power and profits in the fertilizer sector, CF has a tremendous return on equity (ROE). Its trailing 12 month ROE is 46.75%.

CF’s stock is on roller coaster ride right now, but its earnings potential can’t be beat.

“CF” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

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