CF Industries (NYSE: CF) reported Q1 EPS of $4.79, may not compare to the analyst estimate of $4.61. Revenue for the quarter came in at $953.6 million versus the consensus estimate of $977.8 million. EBITDA was $486 million.

Outlook

CF Industries is expected to have strong second quarter performance relative to overall market conditions. The company has been delivering against an order book that was built in the fourth quarter of 2014 and early in the first quarter of 2015 when market and forward pricing conditions compared favorably to spot prices at the end of the first quarter. Overall nitrogen demand is anticipated to be robust during 2015 because of estimated corn planting in excess of 89 million acres and growing industrial demand, especially for nitrogen products used in emissions abatement.

The company has a robust set of orders for ammonia delivery during the second quarter and expects strong ammonia demand, but is likely to have first half 2015 ammonia shipments slightly lower than the record first half of 2014 due to lower ammonia inventory on hand at the beginning of 2015 compared to 2014. Favorable pricing conditions are being supported by limited producer inventories and strong ammonia demand as warm weather progresses north through the Cornbelt.

North America has received a greater than average volume of urea imports during 2015, 32 percent above the five-year average through March. This volume of imports will likely constrain significant upward price movement through the first half of the year. However, with orders that were booked earlier in the year, along with in-market production, particularly in Western Canada, CF Industries should be positioned for favorable average price realizations compared to industry quoted U.S. Gulf prices.

North American UAN demand is expected to be strong due to the need to make up nitrogen application missed due to cold and wet fall and spring seasons. However, a high level of UAN imports and low urea prices are expected to place downward pressure on UAN prices.

North American natural gas continues to provide a cost advantage in comparison to other feedstocks, further supporting CF Industries' near and long-term cash generation prospects. Cold temperatures this winter rivaled last year's and drove natural gas demand that depleted winter-end storage levels to a deficit of 200 BCF compared to the five-year average. However, total gas production in the lower-48 states grew by 9 percent in the first quarter of 2015 compared to 2014. This has pressured NYMEX futures prices below $3.00 per MMBtu through October and below $4.00 per MMBtu through calendar 2022. Natural gas industry projections indicate gas supply should continue to grow throughout 2015, but at a slower rate.

CF Industries put in place collars with strike prices of $2.30 for the floor and $3.20 for the ceiling for an average of 4.2 million MMBtus per month for April through December (roughly 20 percent of the company's gas requirements), and swaps with an average strike price of $2.86 for an average of 6.5 million MMBtus per month for April through December (roughly 30 percent of the company's gas needs). The company remains approximately 50 percent un-hedged for the rest of 2015.

The company has also chosen to hedge a portion of its 2016 natural gas needs. The company has entered into swaps with an average strike price of $3.04 for 4.0 million MMBtus per month for January through October, 2016 (approximately 16 percent of the company's gas requirements).

For earnings history and earnings-related data on CF Industries (CF) click here.