Rentech Nitrogen Partners LP (RNF): An Early Earnings Look

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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 LP (NYSE:RNF) 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 Partners LP (NYSE:RNF) 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 Partners LP (NYSE:RNF) 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 Partners LP (NYSE:RNF) 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 Company, L.P. (NYSE:TNH) has maintained healthy distribution yields of more than 6% based largely on low input costs, but it can’t compare to Rentech Nitrogen Partners LP (NYSE:RNF)’s 8% yield. Although rival CVR Partners LP (NYSE:UAN) 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.

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