CF Industries stock is the IBD Stock Of The Day as the ammonia producer makes a bullish move offering an aggressive buy point amid strong dynamics in the nitrogen industry.
CF Industries says worldwide demand for nitrogen remains robust, driven by the need to replenish grain stockpiles. Meanwhile, global inventories of nitrogen, used to make fertilizers, remain extremely tight.
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Nitrogen, Hydrogen And Russia-Ukraine war
"Global grains (supplies) remain extremely low, an issue that has become amplified because of Russia's invasion of Ukraine," CF Industries CEO Tony Will said in a May 4 earnings release. "We think it will take at least two to three years to replenish global grains stocks."
Russia's nitrogen exports took a hit from various sanctions due to the Ukraine war, as well as Russian government-imposed export limits.
Meanwhile, CF is charging ahead on "green hydrogen" (produced through a carbon-free process) as global economies shift to cleaner fuels.
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Though far from sexy, fertilizer companies produce a vital product with generally durable demand. CF Industries, the world's largest ammonia producer and an IBD 50 stock, has cushioned portfolios for many investors during the market's current downslide.
Green hydrogen and ammonia are key elements of the constellation of strategies through which companies, industries and countries are navigating toward net-zero carbon emissions.
By 2050, hydrogen will meet 20% of the world's energy needs, according to some forecasts. That would be up from less than 1% today. Ammonia is three parts hydrogen and one part nitrogen. It's used as a means to transport hydrogen, as well as being a fuel in its own right, CF says.
Deerfield, Ill.-based CF Industries produces 10 million tons of ammonia per year and nearly 2 million tons of hydrogen annually.
CF Industries Stock Technical Analysis
Shares of CF Industries rose 5.7% to 103.86 amid a strong, broad rebound on the stock market today. The chart showed that move as a rebound off the 50-day moving average, putting CF stock around 104.48. The bounce, at least intraday, broke above a trendline drawn from the April 13 peak of 113.49. The break offered an entry for aggressive investors.
Notwithstanding the market's two-day rally attempt, the market status remains "market in correction." That means this is a time to be building watchlists, until a follow-through day confirms a new uptrend.
For investors who do choose to nibble at CF stock, a reversal below the 100 price level or 50-day area of support would be a sell signal.
The relative strength line for CF Industries stock has shot up to a 52-week high. In fact, the RS line has risen to a nearly seven-year high though it remains below all-time highs, according to MarketSmith chart analysis. A rising RS line means that a stock is outperforming the S&P 500.
Notably, during the recent stock market correction, CF stock never dropped more than 20% below its April 13 high. It is now trading less than 8% below that high. This highly rated stock remains above short- and long-term levels of support while the S&P 500 remains mired below those key technical markers.
No. 1 IBD 50 Stock With Perfect Composite Score
CF Industries stock ranks No. 1 among the IBD 50 list of top growth stocks.
This top stock earns a perfect IBD Composite Rating of 99. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
In addition, CF stock shows a near-perfect Relative Strength (RS) Rating of 98 out of 99, meaning it has outperformed 98% of all stocks in IBD's database over the past year.
The agricultural chemicals industry group ranks a dazzling No. 3 out of 197 industry groups tracked by IBD. CF Industries is the top stock among 14 stocks in its group, which also includes Mosaic, Nutrien and FMC.
CF Industries Earnings And Fundamentals
In addition to a perfect Composite score, nitrogen fertilizer producer CF Industries earns the best-possible EPS Rating of 99.
On May 4, CF disclosed that profits soared 526% in the March quarter while sales surged 174%, accelerating from a 131% gain the prior quarter.
Analysts polled by FactSet forecast CF earnings per share will nearly triple in all of 2022 as sales leap 78%. In 2023, both CF's earnings and sales are seen falling by double digits.
CF stock boasts five quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of March, 1,730 funds owned CF Industries stock, up from 1,344 funds in March 2021.
