Buy CF Industries To Play Growing Nitrogen, Agri Markets

CF Industries Holdings Inc (CF) reported better than expected third quarter adjusted EPS of $5.85 on the back of higher ammonia prices and lower than expected costs (favorable natural gas prices).

We have a bullish stance on CF because we believe that the current nitrogen fundamentals remain robust, and the company will not only continue to benefit from favorable agricultural and nitrogen markets in the next quarter, but in 2013 as well. Favorable grain prices and elevated farmer income will increase the application of fertilizers, which bodes well for the company's future. The company's cheap valuations and increasing nitrogen margins further support our stance.

A steep decline in prices of agricultural commodities across the globe due to capacity expansion and an increase in natural gas prices are key risks to our analysis. Read more.