Hook / Thesis
CVR Partners (UAN) is the kind of cash-producing, high-yielding commodity exposure that deserves a place on every income-oriented investor's radar. The company reported Q3 fiscal 2025 results (filed 10/30/2025) showing revenue of $163.55M and net income of $43.07M while generating $91.74M of operating cash in the quarter. Management has been explicit about returning cash through distributions: the most recent four declared distributions sum to roughly $11.92 per share on an annualized basis, implying a yield of about 10.5% at the recent share price of $113.12.
Why the market should care
At a glance UAN looks attractive for two reasons: operating cash flows materially exceed required capex and the stock trades at a low multiple if you annualize recent earnings. Diluted shares are ~10.57M (diluted average shares), so a $113.12 share price implies a market capitalizaton near $1.20B (10.57M x $113.12 ≈ $1.196B). Using Q3 2025 diluted EPS of $4.08 and simple annualization (x4 = $16.32) gives a P/E of ~7x. That combination of strong cash generation, an active distribution program and a single-digit P/E is rare in commodity-facing names.
Business snapshot
CVR Partners is a U.S.-focused manufacturer and supplier of nitrogen fertilizer products - primarily Urea Ammonium Nitrate (UAN) and ammonia - with a primary customer base across Kansas, Missouri, Nebraska, Iowa, Illinois, Colorado and Texas. UAN product sales are the core revenue driver. The business benefits from integrated production assets that can produce ammonia and downstream UAN blending, which gives the company operating leverage when agricultural demand and nitrogen prices are supportive.
Fundamental drivers - what’s working
- Strong recent profitability: Q3 fiscal 2025 revenue was $163.55M with operating income of $50.64M and net income attributable to parent of $43.07M (filing dated 10/30/2025).
- Robust cash generation: net cash provided by operating activities for Q3 fiscal 2025 was $91.74M. That’s material for a company with ~10.6M diluted shares.
- Active distributions: management has continued to declare cash distributions each quarter. The last four declared amounts were $4.02 (pay 11/17/2025), $3.89 (pay 08/18/2025), $2.26 (pay 05/19/2025) and $1.75 (pay 03/10/2025), totaling about $11.92 annualized - a roughly 10.5% yield at $113.12.
Proof points from the filings
- Revenues: Q1 2025 $142.87M, Q2 2025 $168.56M, Q3 2025 $163.55M - showing a generally healthy topline across the year with quarter-to-quarter variability as expected in commodity cycles.
- Profitability trend: net income rose from $27.09M in Q1 2025 to $38.77M in Q2 and $43.07M in Q3 2025.
- Balance sheet snapshot (Q3 2025): assets $1,037.20M, liabilities $718.70M, equity $318.50M; inventory ~$81.85M.
- Cash flow: Q3 2025 net cash from operating activities $91.74M and net cash flow of $41.78M after financing and investing.
Valuation framing
We derive a practical valuation frame from company-reported metrics rather than external comps. Using the most recent diluted average shares (10.57M) and last close $113.12 implies market cap ≈ $1.20B. Annualizing the Q3 2025 diluted EPS of $4.08 gives an approximate annual EPS of $16.32; at $113.12 that is a P/E of ~7x. That’s materially below most defensive industrials and even many cyclical commodity names when they’re in favorable cash cycles.
Two caveats on valuation:
- Annualizing a single quarter assumes the current crop/commodity environment persists; fertilizer prices and margins are cyclical and can compress quickly.
- Debt and leverage require context. The company’s liabilities were $718.70M in Q3 2025 and noncurrent liabilities $610.97M, so enterprise value vs. true net debt needs more granularity than this dataset provides. The company is not lightly levered in absolute terms and has historically used operating cash to make distributions and reduce leverage when possible.
Trade idea - actionable plan (long)
Trade direction: Long. Time horizon: swing / position (3–12 months). Risk level: Medium.
| Action | Level | Rationale |
|---|---|---|
| Entry (tranche 1) | $108 - $113 | Buy on a small pullback or at-the-market near current levels; prioritise any dip toward $108. |
| Size | 3% - 6% of portfolio | High yield but cyclical commodity exposure - keep allocation modest. |
| Stop-loss | $92 (hard stop) | Close below $92 signals distribution/cash-flow stress or a material operational event; roughly 18% below current. |
| Target 1 | $140 | ~24% upside; reflects multiple expansion toward low-teens P/E or re-rating on sustained cash flows. |
| Target 2 | $170 | ~50% upside; assumes sustained distributions/normalisation and possible special distribution. |
| Aggressive target | $220 | ~95% upside; scenario with continued strong fertilizer cycle and additional special distributions. |
Trade management: scale in 50% of intended size on the first tranche and add on confirmed follow-through (volume-backed close above $130). Take partial profits at Target 1 and re-evaluate yield vs. forward cash flow if distribution policy changes.
Catalysts to watch (2–5)
- Quarterly earnings / operating cash reports - consistent operating cash > capex supports distributions.
- Quarterly distribution declarations - management has a history of special/variable distributions; any increase or special distribution would re-rate the shares.
- Broader fertilizer / nitrogen price environment and crop fundamentals - weather and planting intentions can move demand quickly.
- Operational uptime at production facilities - outages materially affect margins and cash flow.
Risks and counterarguments
There are at least four meaningful risks investors must price in:
- Commodity-price and demand cyclicality. UAN and ammonia prices swing with global supply/demand and crop planting cycles. A down cycle could compress margins and distributions quickly.
- Distribution sustainability. A 10%+ yield is attractive but can be volatile. Management may reduce cash distributions if operating cash weakens or debt covenants tighten.
- Leverage and balance-sheet risk. Liabilities were $718.70M in Q3 2025; if weak EBITDA coincides with higher interest costs, leverage can become a constraint on returns.
- Operational/plant risk. An outage at key facilities would hit volumes, margins and cash flow in the near term.
- Regulatory / environmental risk. Fertilizer production is resource- and regulation-sensitive; new rules or compliance costs could pressure free cash flow.
Counterargument: Skeptics will point out that a high yield often signals underlying business stress. That’s valid — however the company reported $91.74M of operating cash in Q3 2025 and net income of $43.07M in the same quarter, which supports the current distribution cadence. The right way to trade UAN is to treat the yield as a presentation of cash return that must be actively monitored, not a buy-and-forget payday.
What would change my mind
I would downgrade the trade if any of the following happen:
- Management materially reduces scheduled distributions and signals that operating cash no longer covers the payout.
- Quarterly operating cash falls meaningfully below the company’s historical run-rate (e.g., sustained OCF < $25M/quarter).
- A prolonged drop in nitrogen product pricing that hits margins and forces asset write-downs or heavy balance-sheet action.
Conclusion
CVR Partners combines tangible operating cash generation (Q3 2025 OCF $91.74M), a clear shareholder-return bias (recent distribution run-rate ≈ $11.92/year) and a valuation that looks inexpensive if recent margins hold (annualized EPS ~ $16.32 → P/E ~7x at $113.12). For investors comfortable with cyclical commodity risk and willing to actively monitor distributions and cash flow, UAN is a compelling long with defined entry, stops and multi-stage upside targets. Size the position conservatively and treat the position as income-first with upside optionality.
Disclosure: This is a trade idea for educational purposes and not investment advice. Position sizing and stop levels should be tailored to your risk tolerance and portfolio.