CF CF Industries
Low-cost nitrogen producer with shareholder-friendly management, priced as though the cycle never turns back up.
The business
CF Industries makes nitrogen fertilizer (ammonia, urea, UAN, ammonium nitrate) and industrial nitrogen products such as diesel exhaust fluid, mainly at large North American plants. Natural gas is both its feedstock and its main cost, so it earns the spread between global nitrogen prices, which are set by high-cost producers in Europe and Asia, and cheap US gas. Demand comes from planted corn acreage and industrial use, and results swing hard with the commodity cycle.
Quality gate · 85/100
Moat & management
| Moat | narrow moat |
| Source | cost advantage |
| Trajectory | stable |
| Management | excellent |
Low-cost US shale gas, scale, and a dense logistics network serving the US Corn Belt put CF in the lowest quartile of the global cost curve. The marginal European producer sets the price, so CF earns a structural spread through the cycle. The advantage depends on the US-versus-global gas price gap staying in place, not on anything CF owns, so it is narrow rather than wide.
Management has cut the share count by roughly 8% a year, reduced debt, and avoided overbuilding at the peak of the cycle. The Blue Point low-carbon ammonia JV with JERA and Mitsui is a disciplined, partner-funded growth bet rather than empire-building.
Owner-earnings inputs
| Owner earnings (TTM) | 1.90B |
| Owner-earnings yield | 10.5% |
| Free-cash-flow yield | 10.5% |
| Growth used (normalized) | -1.3% |
| Market-implied growth (reverse DCF) | -7.3% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 9.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 1.88B | -1.3% | 1.72B |
| 2 | 1.86B | -0.9% | 1.57B |
| 3 | 1.85B | -0.6% | 1.43B |
| 4 | 1.84B | -0.3% | 1.31B |
| 5 | 1.84B | -0.0% | 1.20B |
| 6 | 1.85B | 0.3% | 1.10B |
| 7 | 1.86B | 0.6% | 1.02B |
| 8 | 1.88B | 0.9% | 941.04M |
| 9 | 1.90B | 1.2% | 873.51M |
| 10 | 1.93B | 1.5% | 813.26M |
| 11 | 1.96B | 1.8% | 759.43M |
| 12 | 2.00B | 2.1% | 711.28M |
| 13 | 2.05B | 2.4% | 668.16M |
| 14 | 2.10B | 2.7% | 629.52M |
| 15 | 2.17B | 3.0% | 594.87M |
Key risks
- Commodity cyclicality: TTM earnings may be above mid-cycle, and a fall in nitrogen prices or a rise in Henry Hub gas would compress margins sharply
- US LNG export growth narrowing the US-versus-global gas cost advantage over the decade
- Low-carbon ammonia demand (clean fuel, power co-firing) developing more slowly than planned, stranding Blue Point capital
Catalysts
- Continued large buybacks at a roughly 10% FCF yield shrinking the share count
- Blue Point and 45Q carbon-capture credits adding contracted, lower-volatility earnings
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~-7%/yr owner-earnings growth over 15y (reverse DCF); model credits -1%. Capped at market + 6pts.