We came across a bullish thesis on CVR Partners, LP (UAN) on Triple S Special Situations Investing’s Substack by TripleS Special Situations. In this article, we will summarize the bulls’ thesis on UAN. CVR Partners, LP share was trading at $68.98 as of October 10th. UAN’s trailing P/E was 14.74 according to Yahoo Finance.
A rustic farm field with a tractor spreadng nitrogen-based fertilizer in the background.
CVR Partners LP (UAN) is a nitrogen fertilizer producer offering a high-yield investment opportunity, currently paying a substantial 10% dividend. This business benefits from strong operational performance and consistent demand in the agricultural sector, positioning it as an attractive prospect for income-focused investors. UAN generates its revenue by producing and selling nitrogen fertilizers, specifically ammonia and urea ammonium nitrate (UAN). Its strategic locations in Kansas and Illinois give it a cost advantage, with lower energy costs and proximity to major agricultural markets in the Midwest, reducing distribution expenses. In Q2 2024, UAN sold approximately 330,000 tons of UAN and 43,000 tons of ammonia, both at competitive prices. Despite a drop in pricing compared to 2023, the company’s robust plant utilization and strategic projects ensure it remains competitive.
Investing in UAN is compelling due to several factors. First, its 10% dividend yield is hard to match in today’s market, especially for those seeking consistent cash flow. Second, there is potential for capital appreciation if CVR Energy, UAN’s parent company, proceeds with a buyout. CVR Energy, having recently shifted focus away from external distractions, may seek to consolidate UAN, unlocking additional value. This prospect is further fueled by the influence of Carl Icahn, who holds a significant stake in CVR Energy, known for driving shareholder value in his investments.
Financially, UAN is in a strong position. In Q2 2024, it reported net sales of $133 million, net income of $26 million, and EBITDA of $54 million. The company’s disciplined capital spending, estimated at around $40 million for 2024, has allowed it to reduce debt and enhance free cash flow. With a projected free cash flow yield of 17%, UAN’s valuation appears attractive, especially for value-oriented investors. UAN offers an interesting opportunity in the fertilizer industry due to its combination of high yield, financial strength, and potential upside from a buyout by CVR Energy.
CVR Partners, LP is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held UAN at the end of the second quarter which was 3 in the previous quarter. While we acknowledge the risk and potential of UAN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UAN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.