CF Industries shares jump more than 6% Monday after JPMorgan upgrades to Overweight, citing healthy cash flow, positive outlook for agriculture industry
May 24, 2011
– Shares of CF Industries Holdings Inc. leaped more than 6 percent Monday as JPMorgan upgraded its recommendation for the fertilizer maker to "Overweight." The company scored one of the biggest gains of the day in trading on the New York Stock Exchange. Other fertilizer stocks rose as well.
THE SPARK: Analysts at JPMorgan said that CF Industries' healthy cash flow as well as a positive outlook for the agriculture industry in the coming year warranted the upgrade for its shares. For example, they said, prices for phosphate are likely to remain resilient this year because of strong crop prices.
Food prices have been rising swiftly in recent months as bad weather has crimped supply and a growing middle class in developing nations consumes more.
A separate note by Citibank on Monday highlighted the boost to fertilizer prices from the continuing strong dynamics of agriculture. The note cites Agrium Inc., Mosaic Co. and Potash Corp. of Saskatchewan Inc., with target share prices of $94, $84 and $61, respectively.
Deerfield, Ill.-based CF Industries is the biggest producer of nitrogen fertilizer products in North America and the second-largest nitrogen producer in the world, the JPMorgan analysts noted. The company enjoys a big advantage in nitrogen production costs over its competitors abroad.
JPMorgan also raised its December target price for CF Industries shares to $170 from the previous $150. The stock has traded between $57.56 and $153.83 over the past 52 weeks.
The JPMorgan analysts, led by Jeffrey Zekauskas, maintained their earnings estimates at $16.40 a share for 2011 and $14.40 for 2012.
SHARE ACTION: CF Industries shares jumped $8.69, or 6.3 percent, to end at $147.75 in trading Monday. Agrium rose $1.16 to $81.10, Mosaic advanced $1.33, or 2 percent, to $66.75 and Potash gained $1.11, or 2.1 percent, to $53.15.
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