by Ian Harvey
IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.
Option Trade – CF Industries Holdings, Inc. (NYSE:CF) Calls
Thursday, January 05, 2017
**OPTION TRADE: Buy the CF FEB 17 2017 35.000 call at approximately $1.50. Sell price is left to your own judgment.
Agriculture as a sector quietly turned around at the end of 2016. And CF Industries Holdings, Inc. (NYSE:CF), a manufacturer and distributor of nitrogen fertilizer and other nitrogen products, after bottoming in August, consolidated sideways and then jumped 41.6% in less than two months to close the year. Now firmly above the 200-day moving average, there appears to be plenty of continued strength.
CF Industries has announced the completion of its capacity expansion projects, with the successful start of new ammonia and urea plants at its Port Neal, IA, Nitrogen Complex.
CF Industries' ammonia plant began operations late last month and has been producing roughly at its nameplate capacity of 2,425 tons per day.
The annual gross ammonia capacity at Port Neal now stands at 1.2 million tons, higher than the previous capacity of 380,000 tons. Output from the new ammonia capacity is expected to be mostly upgraded to urea. The total annual urea capacity at the facility is now 1.4 million tons, up from the previous capacity of 50,000 tons. Total annual UAN capacity remains stable at 800,000 tons.
While shares of CF Industries dipped 1% to $31.63 on Dec 28, the company's shares have gained 29.9% in the last three months.
In the third quarter of 2016, CF Industries reported a loss of $30 million or 13 cents per share as against a profit of $90 million or 39 cents per share, recorded a year ago. However, adjusted earnings of 13 cents per share beat the Consensus Estimate of 5 cents.
The company noted that the agricultural outlook for North America suggests sustained profitability at the farm level for corn and soybeans notwithstanding the less profitable acreage in the Western Corn Belt and Southeast. Consequently, planted acres for corn are expected to fall to about 88 million acres in 2017 vis-à-vis about 94 million acres planted in 2016.
Based on analyst estimates CF Industries’ earnings are supposed to increase by 37.1% in years’ time. This means that earnings per share are to rise to $1.33 levels.
During the same time the revenue will grow from $3,933 Million to $4,431 Million in 2018 and net income is predicted to catapult from $70 M to $321 M in 2018, roughly growing 4.6x. Margins are predicted to be quite acceptable at 7.2% during this time as well.
BMO Capital Markets reaffirmed their buy rating on shares of CF Industries Holdings, Inc. in a report published on Tuesday.
Also, heading into the fourth quarter of 2016, a total of 38 of the hedge funds were bullish with long positions in CF stock, a change of 12% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
CF Industries Holdings has a 50-day moving average price of $29.27 and a 200-day moving average price of $25.69. The company has a market capitalization of $7.43 billion, a P/E ratio of 106.23 and a beta of 1.39. CF Industries Holdings has a 12 month low of $20.77 and a 12 month high of $38.71.
Option Trade – Constellation Brands, Inc. (NYSE:STZ) Calls
Wednesday, January 04, 2017
**OPTION TRADE: Buy the STZ JAN 20 2017 160.000 call at approximately $2.00. Sell price is left to your own judgment.
Constellation Brands, Inc. (NYSE:STZ), a producer and marketer of beer, wine and spirits with operations in the United States, Canada, Mexico, New Zealand and Italy, will report its third-quarter numbers on January 5. The company will post its quarterly results before the market open, with the consensus calling for earnings of $1.70 per share. During the same period last year the company had earnings of $1.42 per share.
Last quarter, the company had delivered a positive earnings surprise of 6.6%. In fact, it has outperformed the Consensus Estimate by an average of 5.8% over the trailing four quarters.
Constellation Brands is on a roll heading into its third-quarter earnings release this week. Over the past six months, sales have improved 15%, and earnings have soared at an even faster pace -- up 23%.
The company is soaking up market share in the alcoholic beverage industry, especially in the premium imported beer segment. Its Corona Extra and Modelo Especial brands helped the beer division post 20% higher revenue as strong volume growth met with increasing average prices to send profitability up by 2 percentage points.
Constellation Brands may have trouble keeping that growth pace going in a highly competitive industry. Yet executives are optimistic that beer sales will grow by as much as 17% this fiscal year, which should power a 17% profit gain to roughly $6.38 per share.
Factors to Consider
Constellation Brands' top and bottom line have been benefiting from strength in the beer business, improving trends at its wine and spirits business, and solid overall depletion trends. Armed with a formidable portfolio of well-known brands, Constellation Brands is the largest wine company in the world. Moreover, it has a dominant position in the premium wine and beer segment in the U.S. This provides it with a competitive edge and bolsters its well-established position in the market.
Further, the company's strategy of boosting growth via acquisitions and its efforts to include new products in its wine and spirits businesses have been major growth drivers.
Further, the company stands to gain from its consistent focus on brand building and initiatives to include new products in its wine and spirits business. Owing to its strategic endeavors, the company is witnessing robust depletion trends and increasing market share in the U.S. wine and spirits category. This was well demonstrated by double-digit depletion growth at each of its recently acquired brands namely, Ballast Point, Prisoner and Meiomi brands, in second-quarter fiscal 2017.
Apart from this, Constellation Brands focuses on rebalancing its assets portfolio by expanding operations directed toward achieving business growth, while exiting the underperforming businesses. Recent acquisitions in the Beer, as well as Wine and Spirits segments include that of Obregon brewery from Grupo Modelo, the Ballast Point craft beer, premium wine brands from Charles Smith Wine; High West Distillery and The Prisoner Wine Company brands portfolio, among others.
Moreover, in an attempt to create value for its shareholders and strengthen financial position of its Wine and Spirits business, the company recently completed the sale of its Canadian Wine business to Ontario Teachers' Pension Plan for C$1.03 billion.
Coming to financials, the company flaunts a spectacular history with regard to its sales and earnings. Incidentally, in second-quarter fiscal 2017, both the top and bottom line registered double-digit growth and exceeded expectations. While the stellar quarter marked the company's eighth consecutive earnings beat, Constellation Brands has surpassed sales estimates for six straight quarters now.
Encouraged by a splendid quarter, management raised its fiscal 2017 earnings outlook. Further, the company raised the lower end of its beer sales guidance for the same time frame, reflecting further confidence in its future performance. Owing to these factors, estimates for fiscal 2017 have been trending upward, since the earnings announcement.
Constellation Brands received a $160.00 price objective from equities research analysts at Susquehanna in a note issued to investors on Tuesday. The firm currently has a “hold” rating on the stock. Susquehanna’s target price would suggest a potential upside of 3.39% from the company’s current price.
One research analyst has rated the stock with a sell rating, five have issued a hold rating, twelve have issued a buy rating and one has issued a strong buy rating to the company. Constellation Brands currently has a consensus rating of “Buy” and an average price target of $179.15.
Constellation Brands Inc looks in good shape, evident from its robust stock price movement that has surged 6.5% year to date. It is believed that Constellation's stock is riding high on solid earnings track record, formidable brands portfolio, strategic endeavors and financial strength.
Constellation Brands has a market capitalization of $31.12 billion, a PE ratio of 26.63 and a beta of 0.50. The stock has a 50 day moving average price of $152.97 and a 200 day moving average price of $161.46. Constellation Brands has a 1-year low of $130.23 and a 1-year high of $173.55.
Monsanto Company (NYSE:MON) Put
Tuesday, January 03, 2017
**OPTION TRADE: Buy the MON JAN 20 2017 100.000 put at approximately $0.25. Sell price is left to your own judgment.
Monsanto Company (NYSE:MON), a provider of agricultural products for farmers, is due to post earnings results ahead of the opening bell on Thursday. The consensus calls for a profit of $0.01 for the quarter, versus a loss of $0.11 during the same period last year.
Monsanto has done little to impress Wall Street during the second half of the year, and as such the stock has been stuck in a fairly tight sideways trend since the beginning of summer. MON shares have trended higher since the election, as shares moved in sympathy to the overall market, but the stock is once again stuck in a sideways patter, and in order for the stock to move higher, the company is really going to need to impress with its Q1 numbers. The fiscal first quarter is never a great quarter for the company, which generates the vast majority of its profits during the spring and summer months.
Its stock has trailed the market slightly in 2016 as operating income slumps under the pressure of weak pricing on many of its core seed products. Execution slip-ups added to that decline last quarter, as a delay of its latest Roundup launch lowered soybean volume and contributed to profitability declines. Over the last nine months, Monsanto's net profit margin has declined to 14% of sales from 22% in the prior-year period.
Also, any bullish aspects would be partially shadowed by major headwinds such as sluggish global economy, lower investments in agricultural inputs, volatile weather patterns or sturdy competition within the industry.
Monsanto Co. has been assigned a $92.00 price target by stock analysts at Goldman Sachs Group Inc. in a research report issued to clients and investors on Monday. The firm currently has a “sell” rating on the stock. Goldman Sachs Group Inc.’s price target suggests a potential downside of 12.60% from the company’s previous close.
The stock gained 6.9% IN 2016.
Monsanto has a one year low of $83.73 and a one year high of $114.26. The firm has a market cap of $46.03 billion, a P/E ratio of 35.17 and a beta of 1.01. The company’s 50 day moving average price is $103.24 and its 200 day moving average price is $103.94.