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Can CVR Partners (UAN) Spring a Surprise in Q3 Earnings?

CVR Partners, LP UAN is set to release third-quarter 2017 results, ahead of the bell on Nov 1.

Last quarter, the company delivered a positive earnings surprise of 25%. In second-quarter 2017, CVR Partners posted a loss of 3 cents per share, narrower than the year-ago loss of 15 cents. The reported loss was lower than the Zacks Consensus Estimate of a loss of 4 cents.

On a year-over-year basis, the company’s net sales fell 18% to $97.9 million in the second quarter.

CVR Partners missed earnings estimates in three of the trailing four quarters with an average negative surprise of 222.9%.

Let’s take a look at how things are shaping up for this announcement.

CVR Partners, LP Price and EPS Surprise


Factors to Consider

CVR Partners, in its second-quarter earnings call, said that nitrogen prices remains affected by over production particularly in the United States. The remaining large U.S. capacity expansions are expected to come on stream and enter production during third-quarter 2017. The company remains focused on operating its facilities at high on-stream rates and increasing marketing and logistics efforts while managing costs and capital spending.

The company remains committed to ramp up its UAN (urea ammonium nitrate) production capacity. CVR Partners is likely to benefit from healthy demand for nitrogen fertilizers through second-half 2017 as well as from the Rentech Nitrogen Partners acquisition. With the buyout of Rentech Nitrogen Partners, the company has been able to create an entity with larger scale, enhance production capacity and increase operating reach. The combined company is now the second-biggest producer of UAN in North America.

However, the company remains exposed to headwinds from weak nitrogen fertilizer prices, which may continue to put pressure on its bottom line in the to-be-reported quarter. Abundant nitrogen supply driven by new production capacity is expected weigh on global prices this year. The company also faces intense price competition.

CVR Partners’ shares have declined around 4.1% over the past three months underperforming the industry’s 12% gain.


Earnings Whispers

Our proven model does not conclusively show that CVR Partners is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for CVR Partners is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 10 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CVR Partners carries a Zacks Rank #3. Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Concurrently, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the basic materials space you can consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Cabot Corporation CBT has an Earnings ESP of +1.62% and a Zacks Rank #1.You can see the complete list of today’s Zacks #1 Rank stocks here.

Carpenter Technology Corporation CRS has an Earnings ESP of +1.46% and a Zacks Rank #1.

Westlake Chemical Corporation WLK has an Earnings ESP of +1.08% and a Zacks Rank #1.

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