Tag Archives: Terra Nitrogen

Business, Finance, Occupation & Industry

3 Companies That Could Be Hurt by Rising Natural Gas Prices

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By Matthew DiLallo, The Motley Fool

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Winter just doesn’t seem to want to give way to spring this year. Where I live, we’ve been hit with more snow and a continuation of this cold winter. Frustrations with the late spring are beginning to boil over and cabin fever has gotten so bad that our beloved Punxsutawney Phil has been indicted after a botched forecast of an early spring.

Not only has the late spring caused a lot of ire among those ready for winter’s end, it’s also causing natural gas prices to head higher. While that’s a welcome sight for producers, heavy users of natural gas are not as thrilled. While these companies have enjoyed the profits made while using cheap natural gas, if prices keep going higher the situation will reverse. Here are three companies that could feel an impact if natural gas prices keep going higher.

CF Industries
The fertilizer maker is a heavy user of natural gas as a feedstock in fertilizer production. It has benefited handsomely from cheap natural gas, which drove record sales and earnings last year. It’s also betting big that natural gas prices will stay low by investing $3.8 billion to expand its operations.

The company is anticipating a very positive operating environment for the year ahead, highlighted by favorable natural gas costs. However, as of its last earnings report it had only hedged its natural gas needs through April of this year. A steady rise in price could affect its bottom line, and the same can be said for its publicly traded subsidiary Terra Nitrogen . The volatility of natural gas prices is a big risk to its results and has a real effect on the bottom line: The company’s net earnings last year jumped to $560.8 million from $508 million in 2011, with a 23% realized decrease in natural gas prices. 

Dow Chemical
Dow also has big plans for cheap natural gas. The company has committed more than $4 billion to expand nat-gas use as a feedstock for the production of chemicals and plastics. Among its planned expenditures is a world-scale ethane cracker plant that comes with a $1.7 billion price tag.

For Dow, it sees the potential for these projects to deliver $2.5 billion in annual EBITDA when everything is up and running in 2017. The key to hitting that target is continued low natural gas prices. While Dow has been vocal in its disapproval of increased liquefied natural gas exports, which would raise gas prices, there’s not much it can do to stop Mother Nature from driving prices higher. 

Nucor
Steelmaker Nucor will see a big increase in its use of natural gas when it completes construction of its direct reduced iron, or DRI, facility. The company also uses a lot of gas throughout its U.S. steel manufacturing operations. Low natural gas prices are critical to its success; if they continue to stay low, the company could add to …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Mosaic Earnings: An Early Look

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By Dan Caplinger, The Motley Fool

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Earnings season is just about over, with almost all companies already having reported their quarterly results. But there are still a few companies left to report, and Mosaic is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Fertilizers have been in high demand in recent years, and Mosaic has arisen from relative obscurity to become a much-followed stock in the industry. But lately, Mosaic has dealt with a big competitive disadvantage versus other fertilizer-makers. Let’s take an early look at what’s been happening with Mosaic over the past quarter and what we’re likely to see in its quarterly report on Thursday.

Stats on Mosaic

Analyst EPS Estimate

$0.88

Change From Year-Ago EPS

38%

Revenue Estimate

$2.29 billion

Change From Year-Ago Revenue

4.4%

Earnings Beats in Past 4 Quarters

2

Source: S&P Capital IQ.

Will Mosaic make its shares grow this quarter?
Analysts are getting increasingly optimistic about Mosaic’s future prospects, seeing solid growth for the rest of the 2013 fiscal year and accelerating improvement in earnings during fiscal 2014 and 2015. The stock has also shared in that enthusiasm, rising about 8% since late December.

Fertilizer companies have become extremely popular investments as crop prices have remained high. But the industry has become one of haves and have-nots, with Mosaic and fellow potash- and phosphate-giant PotashCorp having seen shares struggle over the past two years as high production costs and supply gluts have led to lower profits. By contrast, nitrogen-fertilizer players Terra Nitrogen and CVR Partners have seen big gains, as the competitive advantage from low natural gas prices has helped boost their prospects.

But recently, the tide has appeared to start turning. Natural gas prices are finally on the rise, and that has pulled Terra Nitrogen downward in the past month while sending Mosaic higher. Even with concerns about big price declines on recent potash deals with China and India, an evening of the playing field should help Mosaic and PotashCorp recover from their relative underperformance.

Mosaic is also seeking growth in new directions. Just last week, the company announced a huge joint venture with two Saudi Arabian companies in a deal to build a phosphate-fertilizer plant to open in late 2016. The venture could eventually produce 3.5 million tons of phosphate fertilizers annually.

In its quarterly report, watch for Mosaic to discuss how it can stand out from the other major players in the fertilizer market. If the company can manage to establish new profit centers like its Saudi joint venture, then Mosaic could move beyond …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

5 Stocks That Are Too Stingy With Their Dividends

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By Dan Caplinger, The Motley Fool

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Investors want dividend income, and most companies have been more than willing to deliver higher dividends to their shareholders. With nearly 2,900 companies having raised their dividends during 2012, most investors got to share in the strong corporate-earnings results that helped push the stock market so strongly last year.

Yet even as dividends have increased, companies haven’t necessarily been as forthcoming about giving you as much in quarterly payouts as you might deserve. With the average payout ratio of dividends to earnings at just 36%, far below its usual level of closer to 50%, there’s plenty of room for companies to be freer about sharing their wealth. Today, let’s take a look at five companies that are particularly closed-fisted about making dividend payments.

National Oilwell Varco , 8.4% payout ratio
As a major player in the energy-services industry, National Oilwell Varco has done an excellent job of cashing in on the boom in oil and gas. By providing complex equipment like drilling rigs as well as simple supplies like drill pipe and bits and related services, the company has made itself an integral part of the production process for oil and gas producers across the industry.

Yet given how fast the company’s profits have grown, National Oilwell Varco‘s dividends haven’t keep up. Consider: Since 2010, Varco has seen its earnings jump 45%, with the company earning $5.86 per share over the past 12 months. Yet the company has only raised its annual dividend by a puny $0.08. Even if growth slows down or even stops in the near future, Varco still has plenty of capacity to pay more than its 0.7% yield.

Southwest Airlines , 5.2% payout ratio
No airline has been more consistently profitable over the years than Southwest. Even though its decision not to charge baggage fees has left Southwest as the odd player out in the industry, with its rivals adding billions to their bottom lines through fees, Southwest has nevertheless used its customer service advantage to keep itself in the black.

Where Southwest hasn’t soared is in paying dividends. Even though the company finally doubled its long-standing payout rate to a full $0.01 per share quarterly, that still equates to just a 0.3% yield. Admittedly, the airline industry is one where it’s important to have plenty of capital on hand, but Southwest’s strong track record suggests that it should be able to afford handing back more than just peanuts to shareholders.

CF Industries , 5.6% payout ratio
CF Industries has found itself in the right place at the right time, with its lucrative fertilizer business having soared in the wake of rising food prices and high demand from farmers seeking to improve yields. With holdings in both nitrogen-based and phosphate fertilizers, CF hasn’t suffered from a lack of income.

In that light, CF‘s dividend yield of just 0.8% doesn’t make much sense. By contrast, MLP subsidiary Terra Nitrogen pays a 6.6% yield, much …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Rentech Nitrogen Partners: An Early Earnings Look

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By Dan Caplinger, The Motley Fool

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Earnings season is winding down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Rentech Nitrogen Partners is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Nitrogen-based fertilizers have been all the rage lately, as low natural-gas prices have made them much more cost-efficient than competing products. Rentech Nitrogen is one of the big up-and-coming players in the industry. Let’s take an early look at what’s been happening with Rentech Nitrogen Partners over the past quarter and what we’re likely to see in its quarterly report on Tuesday.

Stats on Rentech Nitrogen Partners

Analyst EPS Estimate

$0.58

Change From Year-Ago EPS

93%

Revenue Estimate

$70.6 million

Change From Year-Ago Revenue

12%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Rentech Nitrogen Partners make its earnings grow?
Analysts have slashed their calls on Rentech Nitrogen over the past few months, with earnings-per-share estimates for 2012’s fourth quarter falling $0.28 and full-year 2013 calls dropping $0.24. Yet those negative calls haven’t held the stock back from posting a modest 4% rise since mid-December.

The drop in analyst calls came directly as a result of Rentech Nitrogen’s announcement three months ago, in which the company trimmed its earnings estimates for full-year 2012. Citing $5.1 million in lost income and costs from unscheduled maintenance and downtime at its East Dubuque facility, as well as $6.5 million in costs related to an acquisition, Rentech Nitrogen reduced its calls on both EBITDA and distributable cash per share, which is a very important metric for investors given Rentech Nitrogen‘s status as a master limited partnership.

Yet overall, Rentech Nitrogen is still benefiting from the cost advantage that cheap natural gas gives nitrogen-fertilizer producers. Terra Nitrogen has maintained healthy distribution yields of more than 6% based largely on low input costs, but it can’t compare to Rentech Nitrogen‘s 8% yield. Although rival CVR Partners may benefit when natural-gas prices increase, since it has its own supply of input fuel to rely on, its 3% yield shows the comparative disadvantage it suffers from at the moment.

Eventually, a threat may come from potash producers. Both PotashCorp and Mosaic have struggled from adverse conditions in the potash-fertilizer market, but recent deals with Chinese buyers could help reduce a long-standing potash glut and make those companies more competitive.

In its quarterly report, look for more guidance on how Rentech Nitrogen is positioning itself to handle natural-gas prices that have already doubled from their low …read more
Source: FULL ARTICLE at DailyFinance