Options Trade – CF Industries Holdings, Inc. (CF) Puts
Wednesday, April 03, 2013

Hedge Funds Are Negative Towards CF!

CF Industries Holdings Downgraded by Zacks to Neutral!

**OPTION TRADE: Buy the CF Aug 2013 170.000 put (CF130817P00170000) at or under $5.45, good for the day. Place a protective stop limit at $2.50 and a pre-determined sell at $10.00.

by Ian Harvey

April 03, 2013


CF Industries Holdings, Inc. (NYSE: CF) is a fertilizer maker whose stock fortunes have changed in the past few weeks. The stock had just broken through its 200-day simple moving average to the upside and looked to be moving higher when suddenly the stock started falling — and the bleeding hasn’t stopped.

Description of CF Industries Holdings, Inc.

CF Industries Holdings, Inc. (CF Holdings) is a manufacturer and distributor of nitrogen and phosphate fertilizer products worldwide. The Company operates in two segments: the nitrogen segment and the phosphate segment.

The Company’s principal products in the nitrogen segment are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Its other nitrogen products include urea liquor, diesel exhaust fluid (DEF) and aqua ammonia, which are sold primarily to its industrial customers. Its principal products in the phosphate segment are diammonium phosphate (DAP) and monoammonium phosphate (MAP).

The Company’s market and distribution facilities are concentrated in the midwestern United States and other agricultural areas of the United States and Canada. It also exports nitrogen fertilizer products from its Donaldsonville, Louisiana manufacturing facilities and phosphate fertilizer products from its Florida phosphate operations through its Tampa port facility.

Key Statistics for CF

Current P/E Ratio (ttm) 6.4246
Estimated P/E(12/2013) 7.2556
Relative P/E vs. SPX 0.4154
Earnings Per Share (USD) (ttm) 28.9700
Est. EPS (USD) (12/2013) 25.6520
Est. PEG Ratio 0.7256
Market Cap (M USD) 11,726.35
Shares Outstanding (M) 63.00
30 Day Average Volume 1,339,687
Price/Book (mrq) 1.9851
Price/Sale (ttm) 1.9486
Dividend Indicated Gross Yield 0.86%
Cash Dividend (USD) 0.4000
Last Dividend 02/14/2013
5 Year Dividend Growth 58.49%
Next Earnings Announcement 05/03/2013

There are several factors effecting CF’s progress upwards:-

• Inventories have been rising due to decreased demand, especially from India. In fact the company has had to cut production because inventory is above its five-year average.

• Adding to the problems, demand this spring has simply not been there so far.

• Not only has the late spring caused a lot of ire among those ready for winter’s end, it’s also causing natural gas prices to head higher. While that’s a welcome sight for producers, heavy users of natural gas are not as thrilled. While these companies have enjoyed the profits made while using cheap natural gas, if prices keep going higher the situation will reverse.

As of its last earnings report it had only hedged its natural gas needs through April of this year. A steady rise in price could affect its bottom line, and the same can be said for its publicly traded subsidiary Terra Nitrogen Company, L.P. (NYSE: TNH) . The volatility of natural gas prices is a big risk to its results and has a real effect on the bottom line: The Company’s net earnings last year jumped to $560.8 million from $508 million in 2011, with a 23% realized decrease in natural gas prices.

Hedge Fund Sentiments

CF Industries Holdings, Inc. shareholders have witnessed a decrease in hedge fund sentiment lately.

In preparation for this year, a total of 40 of the hedge funds that held long positions in this stock, a change occurred of -17% from one quarter earlier.

Because CF Industries Holdings, Inc. has witnessed bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of hedge funds that decided to sell off their positions entirely in Q4.

Insider Activity

Bullish insider trading is particularly usable when the company we're looking at has experienced transactions within the past half-year. However, pessimistic insider trading activity seems apparent for CF. Over the last six-month time frame, CF Industries Holdings, Inc. has seen zero unique insiders buying, and 3 insider sales.


Yearly Earnings Forecasts

Year End
EPS* Forecast
High EPS*
Low EPS*
Number of
Over the Last 4 Weeks
Number of Revisions
    Up                       Down
Dec 2013 25.63 28.13 23.49 13 0 1
Dec 2014 23.37 25.15 19.91 9 0 0
Dec 2015 24.06 27.25 21.79 3 0 0
Dec 2016 32.55 32.55 32.55 1 0 0

Quarterly Earnings Forecasts

Quarter End
EPS* Forecast
High EPS*
Low EPS*
Number of
Over the Last 4 Weeks
Number of Revisions
    Up                        Down
Mar 2013 6.17 6.88 5.31 10 1 1
Jun 2013 8.11 9.87 7.12 9 1 1
Sep 2013 5.05 5.72 4.18 9 1 0
Dec 2013 6.18 7.07 5.54 9 1 0
Mar 2014 4.95 5.08 4.82 2 0 0

Analysts Opinions

Zacks lowered shares of CF Industries Holdings (NYSE: CF) from an outperform rating to a neutral rating in a research report released on Thursday morning, 25th March, 2013. Zacks currently has $206.00 price target on the stock.

Shares of CF Industries Holdings opened at 193.25 on Thursday. CF Industries Holdings has a 52 week low of $154.17 and a 52 week high of $233.43. The stock’s 50-day moving average is currently $208. The company has a market cap of $12.176 billion and a P/E ratio of 6.76.

A number of other analysts have also recently weighed in on CF. Analysts at Scotiabank cut their price target on shares of CF Industries Holdings from $225.00 to $220.00 in a research note to investors on Wednesday, March 20th. Separately, analysts at TheStreet reiterated a buy rating on shares of CF Industries Holdings in a research note to investors on Monday, March 18th. Finally, analysts at BMO Capital Markets reiterated a market perform rating on shares of CF Industries Holdings in a research note to investors on Friday, March 15th. They now have a $195.00 price target on the stock, down previously from $200.00.

Three equities research analysts have rated the stock with a sell rating, nine have issued a hold rating and eight have given a buy rating to the company. The stock currently has an average rating of Hold and an average target price of $229.78.

Analyst Firms Making Recommendations


Therefore, based on the facts above the following options trade is recommended…..

**OPTION TRADE: Buy the CF Aug 2013 170.000 put (CF130817P00170000) at or under $5.45, good for the day. Place a protective stop limit at $2.50 and a pre-determined sell at $10.00.

”Success is simple. Do what's right, the right way, at the right time.”

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