CF Industries Our Top Choice Out Of 5 Splendid Plays

Apr.12.12 | About: CF Industries (CF)

"In order to teach chemistry or psychology or even history or Greek a man must actually know something, but for the teacher of English nothing seems to be necessary beyond a crude capacity to read and write."

H.L. Mencken

CF Industries Holdings manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. The company operates in two segments: The nitrogen segment and the phosphate segment. Its primary products in the nitrogen segment are ammonia, urea ammonium nitrate solution, granular urea and ammonium nitrate. Its primary products in the phosphate segment are diammonium phosphate and monoammonium phosphate. We like CF Industries for the following reasons:

  • Management is forecasting that U.S. farmers will plant about 93.5 million acres of corn in 2012, which is equivalent to the record set in 2007. Dry weather in South America has reduced the prospects for corn, leading to a rebound in corn prices. As a result, management expects strong wholesale demand for nitrogen and phosphate fertilizers this spring.
  • For the year ending December 31, 2011, it sold 13 million tons of nitrogen fertilizers and 1.9 million tons of phosphate fertilizers.
  • It reported a blockbuster fourth quarter net earnings of $438.9 million as compared to $200.3 million in the fourth quarter of 2010, which represents an increase of over 100%.
  • It has a strong balance sheet. As of Dec 31, 2011, cash and cash equivalents stood at $1.2 billion.
  • For the year, net earnings stood at $1.54 billion, up significantly from $342 million in 2010.

Reasons to be bullish on CF Industries Holdings, Inc. Co (CF):

It has a strong levered free cash flow of $1.85 billion.

It sports a very strong quarterly earnings growth rate of 119%.

It has a good quarterly revenue growth rate of 38.8%.

Net income has surged from $366 million in 2009 to $1.53 billion in 2011.

Cash flow per share has exploded from $10 in 2009 to $30.85 in 2011.

Sales have risen from $2.6 billion in 2009 to $6.09 billion in 2011.

It has a very low payout ratio of just 7%.

Total cash flow from operating activities has surged from $680 million in 2009 to $2.07 billion in 2011.

A 5 year historical EPS growth rate of 32%.

A good 5 year sales growth rate of 20%.

A good interest current and quick ratio of 1.74 and 1.37 respectively.

A great interest coverage ratio of 25.7.

It has a strong free cash flow yield of 15.35%.

CF reported an EBITDA of $3.01 billion in 2011 as compared to $1.1 billion for 2010.

Sales hit record levels of 14.9 million tons, including a record of 13 million tons of nitrogen based products.

It repurchased 6.5 million shares of common stock, which represents 9% of the outstanding shares.

$100K invested for eight years would have grown to $1.09 million.

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Company: CF Industries Holdings Inc

Levered Free Cash Flow = 1.85B

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Basic Key ratios

  1. Percentage Held by Insiders = 0.42
  2. Number of Institutional Sellers 12 Weeks = 1

Growth

  1. Net Income ($mil) 12/2011 = 1539
  2. Net Income ($mil) 12/2010 = 349
  3. Net Income ($mil) 12/2009 = 366
  4. 12mo Net Income this Q/ 12mo Net Income 4Q's ago = 340.78
  5. Q Net Income this Q/ same qtr yr ago = 119.12
  1. EBITDA ($mil) 12/2011 = 3209
  2. EBITDA ($mil) 12/2010 = 1304
  3. EBITDA ($mil) 12/2009 = 798
  4. Net Income Rpt Qtr ($mil) = 439
  5. Anl Net Income this Yr/ Net Income last Yr = 340.78
  1. Anl EPS before NRI 12/2007 = 6.39
  2. Anl EPS before NRI 12/2008 = 14.41
  3. Anl EPS before NRI 12/2009 = 7.8
  4. Anl EPS before NRI 12/2010 = 8.62
  5. Anl EPS before NRI 12/2011 = 22.9
  1. Cash Flow ($/share) 12/2011 = 30.85
  2. Cash Flow ($/share) 12/2010 = 13.44
  3. Cash Flow ($/share) 12/2009 = 10
  4. Div 5yr Growth 12/2011 = N/A
  1. Sales ($mil) 12/2011 = 6098
  2. Sales ($mil) 12/2010 = 3965
  3. Sales ($mil) 12/2009 = 2608

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Dividend history

  1. Div Yield = 0.9
  2. Div Yield 5 Yr Average 12/2011 = N/A
  3. Div Yield 5 Yr Average 09/2011 = 0.43
  4. Annual Dividend 12/2011 = 1
  5. Annual Dividend 12/2010 = 0.4
  6. Forward Yield = 0.85
  7. Div 5yr Growth 12/2011 = N/A

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.07
  2. Payout Ratio 06/2011 = 0.09
  3. Payout Ratio 5 Yr Average 09/2011 = 0.04
  4. Change in Payout Ratio = 0.03

Performance

  1. Percentage change Price 52 Wks Relative to S&P 500 = 35.2
  2. Standard Dev Target Price Estimate = 21.31
  3. Average EPS Surprise Last 4 Qtr = 11.5
  4. EPS % Change F2/F1 = -5.11
  5. Next 3-5 Yr Estimate EPS Growth rate = 18.67
  6. 5 Yr Historical EPS Growth 09/2011 = 32.54
  7. ROE 5 Yr Average 09/2011 = 29.7
  1. Return on Investment 12/2011 = N/A
  2. Return on Investment 09/2011 = 24.39
  3. Debt/Tot Cap 5 Yr Average 09/2011 = 11.44
  1. Current Ratio 12/2011 = N/A
  2. Current Ratio 09/2011 = 1.74
  3. Current Ratio 06/2011 = 1.37
  4. Current Ratio 5 Yr Average = 2.05
  5. Quick Ratio = 1.45
  6. Cash Ratio = 1.19
  7. Interest Coverage 12/2011 = N/A
  8. Interest Coverage 09/2011 = 25.76
  9. Interest Coverage 06/2011 = 18.15

Valuation

  1. Book Value Qtr ($/share) 09/2011 = 75.44
  2. Price/ Book = 2.5
  3. Price/ Cash Flow = 6.1
  4. Price/ Sales = 2.02
  5. EV/EBITDA 12 Mo = 3.97
  6. P/E/G F1 = 0.44
  7. Q1 Std Dev/ Consensus = 0.13

Company: Automatic Data Processing (ADP)

Levered Free Cash Flow = 1.25B

Basic Key ratios

  1. Percentage Held by Insiders = 0.64
  2. Number of Institutional Sellers 12 Weeks = 2
  3. Relative Strength 52 weeks = 70
  4. Dividend 5-year Growth = 9.55
  5. Cash Flow 5 -ear Average = 2.91
  6. Dividend Yield 5-Year Average = 2.93

Growth

  1. Net Income ($mil) 12/2011 = 1254
  2. Net Income ($mil) 12/2010 = 1211
  3. Net Income ($mil) 12/2009 = 1333
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 11.93
  5. Quarterly Net Income this Quarterly/same Quarter year ago = 20.93
  1. EBITDA ($mil) 12/2011 = 2313
  2. EBITDA ($mil) 12/2010 = 2238
  3. EBITDA ($mil) 12/2009 = 2299
  4. Net Income Reported Quarterlytr ($mil) = 375
  5. Annual Net Income this Yr/ Net Income last Yr = 3.53
  6. Cash Flow ($/share) 12/2011 = 3.25
  7. Cash Flow ($/share) 12/2010 = 3.11
  8. Cash Flow ($/share) 12/2009 = 3.15
  1. Sales ($mil) 12/2011 = 9880
  2. Sales ($mil) 12/2010 = 8928
  3. Sales ($mil) 12/2009 = 8867
  1. Annual EPS before NRI 12/2007 = 1.8
  2. Annual EPS before NRI 12/2008 = 2.2
  3. Annual EPS before NRI 12/2009 = 2.39
  4. Annual EPS before NRI 12/2010 = 2.37
  5. Annual EPS before NRI 12/2011 = 2.52

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Dividend history

  1. Dividend Yield = 2.93
  2. Dividend Yield 5 Year Average 12/2011 = 2.93
  3. Dividend Yield 5 Year Average 09/2011 = 2.93
  4. Annual Dividend 12/2011 = 1.42
  5. Annual Dividend 12/2010 = 1.35
  6. Forward Yield = 2.93
  7. Dividend 5 year Growth 12/2011 = 9.55

Dividend sustainability

  1. Payout Ratio 06/2011 = 0.6
  2. Payout Ratio 5 Year Average 12/2011 = 0.56
  3. Payout Ratio 5 Year Average 09/2011 = 0.56
  4. Payout Ratio 5 Year Average 06/2011 = 0.55
  5. Change in Payout Ratio = 0.05

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 0.22
  2. Next 3-5 Year Estimate EPS Growth rate = 9.5
  3. EPS Growth Quarterly(1)/Q(-3) = 120
  4. ROE 5 Year Average 12/2011 = 21.69
  5. ROE 5 Year Average 09/2011 = 21.69
  6. ROE 5 Year Average 06/2011 = 21.57
  7. Return on Investment 06/2011 = 21.24
  8. Debt/Total Cap 5 Year Average 12/2011 = 0.73
  9. Debt/Total Cap 5 Year Average 09/2011 = 0.73
  10. Debt/Total Cap 5 Year Average 06/2011 = 0.73
  11. Current Ratio 06/2011 = 1.08
  12. Current Ratio 5 Year Average = 1.19
  13. Quick Ratio = 1.07
  14. Cash Ratio = 1.02
  15. Interest Coverage Quarterly = 277.05

Valuation

  1. Book Value Quarterly = 12.65
  2. Price/ Book = 4.26
  3. Price/ Cash Flow = 16.57
  4. Price/ Sales = 2.56
  5. EV/EBITDA 12 Mo = 10.86

Company: Paychex Inc (PAYX)

Levered Free Cash Flow = $570M

Basic Key ratios

  1. Percentage Held by Insiders = 10.9
  2. Relative Strength 52 weeks = 56
  3. Dividend 5-year Growth = 3.17
  4. Cash Flow 5 -year Average = 1.72
  5. Dividend Yield 5-Year Average = 4.01

Growth

  1. Net Income ($mil) 12/2011 = 515
  2. Net Income ($mil) 12/2010 = 477
  3. Net Income ($mil) 12/2009 = 534
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 6.19
  5. Quarterly Net Income this Quarterly/same Quarter year ago = 3.68
  1. EBITDA ($mil) 12/2011 = 920
  2. EBITDA ($mil) 12/2010 = 851
  3. EBITDA ($mil) 12/2009 = 921
  4. Net Income Reported Quarterlytr ($mil) = 135
  5. Annual Net Income this Yr/ Net Income last Yr = 8.03
  6. Cash Flow ($/share) 12/2011 = 1.78
  7. Cash Flow ($/share) 12/2010 = 1.69
  8. Cash Flow ($/share) 12/2009 = 1.78
  1. Sales ($mil) 12/2011 = 2084
  2. Sales ($mil) 12/2010 = 2001
  3. Sales ($mil) 12/2009 = 2083
  1. Annual EPS before NRI 12/2007 = 1.41
  2. Annual EPS before NRI 12/2008 = 1.56
  3. Annual EPS before NRI 12/2009 = 1.48
  4. Annual EPS before NRI 12/2010 = 1.35
  5. Annual EPS before NRI 12/2011 = 1.42

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Dividend history

  1. Dividend Yield = 4.18
  2. Dividend Yield 5 Year Average 12/2011 = 4.01
  3. Dividend Yield 5 Year Average 09/2011 = 4.01
  4. Annual Dividend 12/2011 = 1.24
  5. Annual Dividend 12/2010 = 1.24
  6. Forward Yield = 4.18
  7. Dividend 5 year Growth 12/2011 = 3.17

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.85
  2. Payout Ratio 06/2011 = 0.86
  3. Payout Ratio 5 Year Average 12/2011 = 0.84
  4. Payout Ratio 5 Year Average 09/2011 = 0.84
  5. Payout Ratio 5 Year Average 06/2011 = 0.82
  6. Change in Payout Ratio = 0.02

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = -8.19
  2. Next 3-5 Year Estimate EPS Growth rate = 8.92
  3. EPS Growth Quarterly(1)/Q(-3) = -102.78
  4. 5 Year History EPS Growth 12/2011 = -1.28
  5. 5 Year History EPS Growth 09/2011 = -1.28
  6. ROE 5 Year Average 12/2011 = 37.37
  7. ROE 5 Year Average 09/2011 = 37.37
  8. ROE 5 Year Average 06/2011 = 37.09
  9. Return on Investment 12/2011 = 35.13
  10. Return on Investment 09/2011 = 35.13
  11. Return on Investment 06/2011 = 35.55
  12. Debt/Total Cap 5 Year Average 12/2011 = 0
  13. Debt/Total Cap 5 Year Average 09/2011 = 0
  14. Debt/Total Cap 5 Year Average 06/2011 = 0
  1. Current Ratio 12/2011 = 1.11
  2. Current Ratio 09/2011 = 1.11
  3. Current Ratio 06/2011 = 1.15
  4. Current Ratio 5 Year Average = 1.12
  5. Quick Ratio = 1.12
  6. Cash Ratio = 1.07
  7. Interest Coverage Quarterly = N/A

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Valuation

  1. Book Value Quarterly = 4.4
  2. Price/ Book = 6.96
  3. Price/ Cash Flow = 17.24
  4. Price/ Sales = 5.04
  5. EV/EBITDA 12 Mo = 11.52

Company: Costco (COST)

Levered Free Cash Flow = $1.17B

Basic Key ratios

  1. Percentage Held by Insiders = 0.95
  2. Number of Institutional Sellers 12 Weeks = 3

Growth

  1. Net Income ($mil) 12/2011 = 1462
  2. Net Income ($mil) 12/2010 = 1303
  3. Net Income ($mil) 12/2009 = 1086
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 8.44
  5. Quarterly Net Income this Quarterly/same Quarter year ago = 13.22
  1. EBITDA ($mil) 12/2011 = 3354
  2. EBITDA ($mil) 12/2010 = 2960
  3. EBITDA ($mil) 12/2009 = 2563
  4. Net Income Reported Quarterlytr ($mil) = 394
  5. Annual Net Income this Yr/ Net Income last Yr = 12.2
  6. Cash Flow ($/sh) 12/2011 = 5.29
  7. Cash Flow ($/sh) 12/2010 = 4.81
  8. Cash Flow ($/sh) 12/2009 = 4.25
  1. Sales ($mil) 12/2011 = 88915
  2. Sales ($mil) 12/2010 = 77946
  3. Sales ($mil) 12/2009 = 71422
  1. Annual EPS before NRI 12/2007 = 2.63
  2. Annual EPS before NRI 12/2008 = 2.91
  3. Annual EPS before NRI 12/2009 = 2.54
  4. Annual EPS before NRI 12/2010 = 2.95
  5. Annual EPS before NRI 12/2011 = 3.3

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Dividend history

  1. Dividend Yield = 1.1
  2. Annual Dividend 12/2011 = 0.89
  3. Annual Dividend 12/2010 = 0.77
  4. Forward Yield = 1.08

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.27
  2. Payout Ratio 06/2011 = 0.28
  3. Payout Ratio 5 Year Average 12/2011 = 0.26
  4. Payout Ratio 5 Year Average 09/2011 = 0.26
  5. Payout Ratio 5 Year Average 06/2011 = 0.25
  6. Change in Payout Ratio = 0.01

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 17.16
  2. Next 3-5 Year Estimate EPS Growth rate = 13.97
  3. EPS Growth Quarterly(1)/Q(-3) = -113.92
  4. 5 Year History EPS Growth 12/2011 = 5.61
  5. 5 Year History EPS Growth 09/2011 = 5.61
  6. ROE 5 Year Average 12/2011 = 12.88
  7. Return on Investment 12/2011 = 11.35
  8. Debt/Total Cap 5 Year Average 12/2011 = 16.63
  1. Current Ratio 12/2011 = 1.16
  2. Current Ratio 5 Year Average = 1.12
  3. Quick Ratio = 0.59
  4. Cash Ratio = 0.51
  5. Interest Coverage Quarterly = 24.22

Valuation

  1. Book Value Quarterly = 29.47
  2. Price/ Book = 3.03
  3. Price/ Cash Flow = 16.88
  4. Price/ Sales = 0.42
  5. EV/EBITDA 12 Mo = 10.27
  6. R-squared EPS Growth 12/2011 = 0.56
  7. R-squared EPS Growth 09/2011 = 0.56

Company: DDR Corp (DDR)

Levered Free Cash Flow = 265.34M

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Growth

  1. Net Income ($mil) 12/2011 = -16
  2. Net Income ($mil) 12/2010 = -209
  3. Net Income ($mil) 12/2009 = -357
  4. 12months Net Income this Quarterly/12 months Net Income 4Q's ago = 92.43
  5. Quarterly Net Income this Quarterly/Same Quarter year ago = 106.18
  1. EBITDA ($mil) 12/2011 = 448
  2. EBITDA ($mil) 12/2010 = 348
  3. EBITDA ($mil) 12/2009 = 237
  4. Net Income Reported Quarterlytr ($mil) = 5
  5. Annual Net Income this Yr/ Net Income last Yr = 92.43
  6. Cash Flow ($/share) 12/2011 = 1.02
  7. Cash Flow ($/share) 12/2010 = 0.37
  8. Cash Flow ($/share) 12/2009 = -0.02
  1. Sales ($mil) 12/2011 = 771
  2. Sales ($mil) 12/2010 = 803
  3. Sales ($mil) 12/2009 = 819
  1. Annual EPS before NRI 12/2007 = 1.28
  2. Annual EPS before NRI 12/2008 = -0.86
  3. Annual EPS before NRI 12/2009 = -1.91
  4. Annual EPS before NRI 12/2010 = -0.8
  5. Annual EPS before NRI 12/2011 = 0.02

Dividend history

  1. Dividend Yield = 3.35
  2. Dividend Yield 5 Year Average 12/2011 = 4.75
  3. Dividend Yield 5 Year Average 09/2011 = 4.75
  4. Annual Dividend 12/2011 = 0.22
  5. Annual Dividend 12/2010 = 0.08
  6. Forward Yield = 3.35
  7. Dividend 5 year Growth 12/2011 = -51.28

Dividend sustainability

  1. Payout Ratio 06/2011 = 1.45

Performance

  1. Percentage Change Price 52 Weeks Relative to S&P 500 = 0.92
  2. Next 3-5 Year Estimate EPS Growth rate = 22.2
  3. EPS Growth Quarterly(1)/Q(-3) = 7-100.00
  4. ROE 5 Year Average 12/2011 = 0.41
  5. Return on Investment 06/2011 = 1.58
  6. Debt/Total Cap 5 Year Average 12/2011 = 61.92
  1. Current Ratio 06/2011 = 1.1
  2. Current Ratio 5 Year Average = 1.15
  3. Quick Ratio = 1.1
  4. Cash Ratio = 0.64
  5. Interest Coverage Quarterly = 0.5

Valuation

  1. Book Value Quarterly = 9.76
  2. Price/ Book = 1.47
  3. Price/ Cash Flow = 13.99
  4. Price/ Sales = 5.01

Notes

DDR Corp announced that it has acquired its joint venture partner's 50% ownership interest in two high quality prime power centers located in Portland, Oregon, and Phoenix, Arizona, for $70 million. The company funded its entire $70 million investment with proceeds from the issuance of 4.8 million common shares through its at-the-market common equity program. At closing, $104 million of mortgage debt was repaid, and these prime shopping centers are now wholly owned by DDR and part of the company's large and growing unencumbered asset pool.

Conclusion

Despite the initial pullback the markets are still extremely overbought and need to let out more steam. Prudent investors would do well to wait for a strong pullback before committing funds to this market. A pullback in the 7-12% ranges would qualify as a strong pullback.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: EPS, Price, broker recommendations and EPS surprise charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com. Consensus estimate analysis table sourced from reuters.com.