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Albemarle (ALB) to Report Q2 Earnings: What's in Store?

Albemarle Corporation ALB will release second-quarter 2020 results after the closing bell on Aug 5. The impacts of demand softness due to the coronavirus pandemic and weak lithium prices are likely to reflect in its second-quarter results.

The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once. In this timeframe, it delivered an earnings surprise of 7.3%, on average.

Albemarle’s shares are up 26% over a year compared with a 1.3% decline of the industry it belongs to.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Albemarle, in May, said that it expects net sales for the second quarter to be between $700 million and $775 million.

The Zacks Consensus Estimate for revenues for Albemarle for the to-be-reported quarter stands at $717 million, reflecting a decline of 19% from the year-ago quarter.

The Zacks Consensus Estimate for net sales for the Lithium unit stands at $240 million, indicating a 26.1% year-over-year drop. The same for the Bromine Specialties segment for the second quarter is pegged at $215 million, reflecting a 15.7% decline on a year-over-year basis.

Moreover, the Zacks Consensus Estimate for net sales for the Catalysts segment is pinned at $188 million, indicating a 29.3% year-over-year decline.

Some Factors to Watch For

The Lithium unit faces headwinds from soft demand due to the pandemic and pricing weakness. The coronavirus outbreak is hurting demand in the automotive market due to reduced automotive OEM (original equipment manufacturer) production. Soft demand and customer shutdowns also affected certain industrial applications. Lithium prices also remain under pressure amid oversupply in the market. The impacts of demand weakness and lower lithium prices are expected to get reflected in the Lithium segment’s sales and margins in the second quarter.

Moreover, weak demand due to coronavirus is likely to have impacted performance in the Bromine Specialties unit. The unit faces challenges from weakness in automotive, consumer electronics, appliances and construction markets due to the pandemic.

In the Catalysts unit, reduced transportation fuel consumption and travel restrictions in Asia due to the pandemic are likely to have hurt Fluid Catalytic Cracking ("FCC") volumes in the June quarter. Lower FCC volumes hurt sales in this segment in the first quarter and the same is expected to have continued in the second quarter.

However, benefits of the company’s cost saving initiatives are expected to get reflected in the quarter to be reported. Albemarle is accelerating its $100 million cost savings program and expects to realize $50-$70 million of savings this year.

Albemarle Corporation Price and EPS Surprise

 

Albemarle Corporation Price and EPS Surprise

Albemarle Corporation price-eps-surprise | Albemarle Corporation Quote

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for Albemarle this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Albemarle is -2.33%. The Zacks Consensus Estimate for earnings for the second quarter is pegged at 72 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks Rank: Albemarle carries a Zacks Rank #5 (Strong Sell).

Stocks That Warrant a Look

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

Barrick Gold Corporation GOLD, scheduled to release earnings on Aug 10, has an Earnings ESP of +0.54% and carries a Zacks Rank #2.

FMC Corporation FMC, slated to release earnings on Aug 4, has an Earnings ESP of +1.13% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pan American Silver Corp. PAAS, slated to release earnings on Aug 5, has an Earnings ESP of +23.81% and carries a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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