Price $120.72 · Base $95.41 · Price is +27% above base
Price (10/14 intraday)
$120.72
Base intrinsic value
$95.41
Bear → Bull range
$41 – $125
Key driver
Steady N price vs mid-cycle; price needs +7% forever
The Take — Still overvalued. The market is capitalizing a war premium as if Hormuz never reopens.
The rev.2 discipline holds — and the stock ran past it. On Sep-11 we cut CF to $104 (mid-cycle EBIT ≈ $2.0B, two methods converging). Refreshed today: management's mid-cycle EBITDA is still $2.9B at $3.50 gas; D&A is running ~$870M → mid-cycle EBIT $2,030M; the 4-yr ex-2022 mean is $2,001M. Same anchor. What changed is the discount rate: the 10Y at 5.2% lifts WACC from 8.46% to 8.92%, and that more than offsets the buybacks (151M shares, down from 163M a year ago). I credit the windfall explicitly — next-12-month EBIT at spot of $2,779M, half of the excess persisting into 2028 — and still land at $95.41.
The spot setup is genuinely exceptional — but it's spot. Henry Hub ~$3.24 vs TTF ~€86/MWh (≈$29–30/MMBtu, highest since Dec-2022): CF's gas advantage over the European marginal producer is ~$25/MMBtu, ~$800+/t of ammonia. The Iran conflict removed ~4–4.5Mt of traded urea and ~1Mt of ammonia; management says the deficit runs through 2027. Yet nitrogen itself has already rolled: urea ~$450/t vs a $700+ April peak; Tampa ammonia ~$545 for October. China is exporting 4–6Mt. Q2 missed ($4.73 vs $5.44) on −15% volume, and Yazoo City is down until H1-27.
Reverse DCF — the decisive number: $120.72 requires steady-state nitrogen prices +7% above mid-cycle forever at $3.50 gas — EBIT ≈ $2,495M, EBITDA ≈ $3,365M, above management's own 2030 target of $3.3B that requires Blue Point and carbon capture to be built. Or Henry Hub at ≈$2.28 forever while LNG export capacity keeps growing. EV is 7.9x mid-cycle EBITDA vs a 6–8x through-cycle band. The 10-yr record (mean EBIT $1,617M; $1,197M ex-2022; $0.1–1.0B in 2016–20) is the reminder of what "normal" has looked like.
Call: Avoid new capital; trim above ~$125. Buy zone $90–98 (base, with near-term FCF of ~$1.7B/yr funding buybacks as the cushion). If you must own it, own it via cash-secured $95–100 puts 60–90 DTE — the war premium pays you to wait. Holders: overwrite with $135 calls (52-wk high $141.96), or a defined-risk bear call spread $135/$145 after the Nov 4 Q3 print. No naked shorts: a Hormuz escalation headline or an EU gas spike re-rates this 10–15% in a week, and the bull (structural tightness +7%) prints $125.
Risk Profile — MEDIUM-HIGH
HIGH
Middle East supply normalization. Short a Hormuz ceasefire/reopening: Gulf urea/ammonia flows return (port damage and insurance delay it, per management), the windfall collapses toward mid-cycle. This is the single biggest swing in the next 12–24 months.
HIGH
Henry Hub / LNG convergence. Each $1/MMBtu ≈ $380M EBIT (a permanent $1 ≈ −$21/sh of value). US nitrogen trades at import parity, so higher HH is a pure margin squeeze — no price offset. LNG export build-out is the structural short.
MED
European gas (TTF) & restarts. Long TTF today (~€86). A European gas normalization is a two-sided loss: it restarts curtailed capacity and lowers the marginal cost that sets the global price floor.
MED
China export policy & farm demand. Short China quota expansions (4–6Mt in 2026). Long corn acreage × application rates; farm economics weaken at high N prices (demand destruction).
MED
Blue Point capital program. ~$1.3B consolidated capex in 2026 (CF share ~$950M); returns are unproven clean-ammonia premia (>$20/t on ~10% of volume so far). Valued at NPV≈0; ±$400M = ±$2.6/sh.
LOW
Balance sheet. Net debt ≈ $1.4B incl. leases, investment grade; no solvency risk. But CHS (minority, ~11% of CF Nitrogen) takes a real cut — $246M paid July 31.
What the "inventory" really is: a spread, not a product — CF sells the gap between US Henry Hub gas and the global marginal cost of nitrogen (today set by curtailed Europe and missing Gulf tonnes). At mid-cycle that spread earns ~12% pre-growth on book capital; at today's price you are buying the war-time spread at a peacetime multiple of it.
Scenario values per share vs price
Bear: Hormuz reopens + LNG pull — NTM EBIT at mid-cycle/$3.75 gas, steady N −8%, HH $4.50 (EBIT $1,130M). Base: NTM at spot (N +10% vs mid-cycle, HH $3.24 → $2,779M), half the excess persists into yr 2, then mgmt mid-cycle $2,030M. Bull: structural tightness — steady N +7%, HH $3.25 (EBIT $2,580M), 80% of windfall into yr 2. Prob-weighted (20/50/30): $93.63.
Driver tornado — value/share from base $95.41
The Hormuz windfall's duration barely moves value (±$2) — two extra years of super-normal EBIT are worth ~$3/sh. Value lives in the steady-state spread and the discount rate. No single swing reaches $120.72.
Engine: EBIT = $2,030M + $65M per 1% N price − $380M per $1 HH above $3.50. Spot ≈ +10% N / $3.24 HH. Red = >15% below price; amber −15%/+5%; green above. The price needs the +5% to +10% rows at today's gas — permanently.
History — revenue vs operating income ($M)
Blue = revenue, green = EBIT (10-K XBRL). 2022 (Ukraine war) is the template for today: a $5.4B EBIT year that mean-reverted to $2.2B in 12 months and $1.7B in 24.
Normalization worksheet ($M)
Year
Revenue
EBIT
Margin
2016
3,685
138
3.7%
2017
4,130
234
5.7%
2018
4,429
766
17.3%
2019
4,590
1,003
21.9%
2020
4,124
623
15.1%
2021
6,538
1,729
26.4%
2022
11,186
5,397
48.2%
2023
6,631
2,230
33.6%
2024
5,936
1,746
29.4%
2025
7,084
2,300
32.5%
TTM Q2-26
7,739
2,987 (≈2,817 ex-$170M litigation gain)
38.6%
10-yr mean / ex-2022 (9-yr)
1,617 / 1,197
4-yr ex-2022 (21,23–25) / 5-yr median
2,001 / 2,230
Mgmt mid-cycle EBITDA $2,900 − D&A ~$870
2,030 ← base
Why mid-cycle, not 10-yr mean: the 10-yr average ($1,617M) is dragged by 2016–17, when new US capacity (incl. CF's own Donaldsonville/Port Neal expansions) flooded the market. Management's $2.9B EBITDA mid-cycle and the 4-yr ex-2022 mean converge at ~$2.0B — the same cross-check that killed the $216 build. Implied base EBITDA = $2,900M ✓ (not above mgmt). Shown separately: 10-yr ex-2022 $1,197M is the bear anchor.
FCF history
OCF
Capex
D&A
FCF
SBC
FCF − SBC
2021
2,873
514
888
2,359
30
2,329
2022
3,855
453
850
3,402
41
3,361
2023
2,757
499
869
2,258
37
2,221
2024
2,271
518
925
1,753
36
1,717
2025
2,752
950
898
1,802
45
1,757
TTM Q2-26 FCF $1,823M (company); TTM distributions to NCI $376M. FCF is consolidated — ~11% of CF Nitrogen belongs to CHS. D&A exceeds sustaining capex (Terra step-up amortization), so the model uses fundamental reinvestment (g ÷ ROIC), not capex-vs-D&A.
*Yr 1 = next 12 months at spot. Mid-cycle grown at 2% inflation from 2026 dollars. PV explicit 9,073 + PV terminal 9,981 = 19,054; terminal share 52% ✓; r > g ✓. Blue Point excluded on both sides (NPV ≈ 0).
Sep-11 rev.2 base (price $133)
$104.0
Refresh inputs (151M sh, 6/30 net debt & NCI, D&A $870M), old WACC 8.46%, no windfall
$100.8
+ Hormuz windfall (NTM at spot, half into yr 2)
$104.7
+ Rf 4.25%→5.20% (WACC 8.46%→8.92%)
$95.4
Cost of capital
Risk-free (10Y UST after Sept-26 spike)
5.20%
Mature ERP
4.40%
Bottom-up unlevered beta (fertilizers/ag chemicals) → levered at D/E 20% (regression 0.53 — ignored, too low for a commodity spread)
0.90 → 1.04
Cost of equity
9.77%
Pre-tax cost of debt (inv. grade) / after-tax @22%