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With a highly anticipated 2013 corn planting, strong domestic fertilizer demand and favorable natural gas costs, CF Industries Holdings Inc. (NYSE:CF) is a stock to own for 2013. CF Industries is the world's second largest producer of nitrogen fertilizer, and stands to benefit from the emergence of low-cost natural gas. The company reported record earnings with Q3 results in November 2012. Look for CF to continue to strengthen margins with increasing sales of fertilizer products in 2013.

CF Industries Holdings Inc.'s third-quarter earnings jumped 22% as the fertilizer producer reported stronger margins and a decline in expenses, though revenue slipped.

In the latest period, CF Industries reported a profit of $403.3 million, or $6.35 a share, up from $330.9 million, or $4.73 a share, a year earlier. The latest quarter included $50.7 million in gains on derivatives and a change in employee post-retirement benefits, which increased per-share results by 50 cents. The year-earlier period included $49.2 million in impairment charges and a natural-gas derivatives loss.

Gross margin widened to 51.6% from 45.4% as input costs dropped 14%. Total other operating costs and expenses were down 36%.

Revenue slipped 3.2% to $1.36 billion primarily due to lower nitrogen volume and phosphate product prices. Lower phosphate product prices in the latest period resulted from lower global demand compared with the same period last year, though phosphate volume increased due to strong demand in North America.

CF Industries, along with its peers, has benefited from rising corn prices and a widespread farm-sector boom, resulting in a surge in its profits lately. Higher phosphate selling prices and growing demand had helped CF Industries post revenue gains for two years, though sales have declined slightly now for two quarters.

CF said it expects a positive operating environment for the remainder of 2012 and into 2013 due to high 2013 corn-planting expectations, strong domestic fertilizer demand and favorable natural-gas costs.

CF's decision to expand capacity reflects expectations for sustained favorable outlook for North American nitrogen production. CF just purchased Viterra's 34 percent stake in the Canadian Fertilizer Ltd. plant in Medicine Hat, Alberta, for C$915 million as part of the Glencore asset sale. The added capacity is the key to expanding sales at CF which was running at near full capacity in 2012.

In the October 2012 World Agriculture Supply and Demand Estimates report, the U.S. Department of Agriculture published its U.S. corn yield estimate for 2012 of 122 bushels per acre which, along with other changes made to the department's inventory and demand estimates, resulted in a projected stocks-to-use ratio of 5.6 percent for the end of the 2012/2013 corn crop marketing year, which would be the lowest level in 17 years. As a result, CF Industries expects U.S. farmers to plant approximately 97 million acres of corn in 2013.

With high planted acres in the United States, domestic demand for phosphate fertilizers is expected to be robust in 2013, following the normally slow winter months at the end of 2012.

An exceptionally early harvest, recent rains across key growing regions, and the anticipation of a large corn planting in 2013 should support strong nitrogen sales volumes as we move into 2013. High acreage expectations, especially for corn, should support strong urea and UAN demand.

The global ammonia market continues to be very tight, given supply reductions from Trinidad and Russian ammonia producers, along with robust demand from North American dealers and distributors building inventory in anticipation of a high volume of fall and spring ammonia application by farmers.

CF Industries is trading at a current price earnings ratio of 7.7 compared to an industry average of 17. CF has a current dividend yield of 0.80%. CF Industries has a 12-month price target of $250.

Source: Look For A Rebound In CF Industries In 2013