Here's Why You Should Hold Onto Albemarle (ALB) Stock Now

Albemarle Corporation ALB is poised to leverage strong expected growth in the battery-grade lithium market. It should benefit from higher demand for lithium-ion batteries that are used to power electric cars.

Shares of Albemarle, which currently carries a Zacks Rank #3 (Hold), are down 23.1% year to date, compared with the 29% decline of its industry.


What’s Going in ALB’s Favor?

Albemarle, earlier this month, raised its earnings outlook for 2019. It now sees adjusted earnings for 2019 in the band of $6.25-$6.65 per share (up from the prior view of $6.10-$6.50), a year-over-year increase of 13-21%.

The company also backed its net sales guidance for 2019 of between $3.65 billion and $3.85 billion, representing 8-14% year over year growth.  It continues to expect adjusted EBITDA for the year in the range of $1,070 million to $1,140 million, representing 6-13% year over year growth.

Albemarle is seeing strong demand for lithium in battery-grade applications. The company is executing a number of projects aimed at boosting its global lithium derivative capacity.

The market for lithium-ion batteries has a lot of untapped potential. Demand for these batteries are expected to go up with their increasing adoption in consumer electronic products as well as efforts to promote the use of electric cars by several governments to curb pollution. The company sees strong year-over-year growth in its Lithium unit for the balance of 2019.

The company is progressing with a 20,000-metric ton lithium hydroxide expansion in China at the Xinyu II facility. It also expects to produce around 40,000 metric tons of lithium carbonate from its two existing operating units in La Negra in Chile in 2019. The company has also commenced work at its lithium hydroxide conversion plant in Kemerton, Western Australia.

Albemarle is also gaining from continued strong demand for flame retardants, especially in electronics, which is supporting volume growth in its Bromine Specialties unit.

A Few Concerns

The company’s Catalysts segment faces some challenges from an expected decline in Performance Catalyst Solutions (PCS) business in 2019 due to pricing pressures and the loss of a large customer contract. Albemarle sees PCS related headwinds of $11 million in 2019.

Albemarle is also exposed to currency headwinds. Unfavorable currency swings, stemming from a stronger dollar against various currencies, impacted its sales by $16.2 million in the second quarter. Unfavorable impact on sales for the Lithium unit was $7.3 million in the quarter. Impact for Bromine and Catalysts units were $3.4 million and $5.4 million, respectively. Currency headwind will likely continue in the third quarter.

The company also faces some headwind from higher raw material costs across its Bromine Specialties and Catalysts segments.

Albemarle Corporation Price and Consensus


Albemarle Corporation Price and Consensus

Albemarle Corporation price-consensus-chart | Albemarle Corporation Quote

Stocks Worth a Look

A few better-ranked stocks worth considering in the basic materials space include Kinross Gold Corporation KGC, NewMarket Corporation NEU and SSR Mining Inc. SSRM.

Kinross has projected earnings growth rate of 150% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 70% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

NewMarket has an expected earnings growth rate of 16.2% for the current year and carries Zacks Rank #1. Its shares have gained around 18% in the past year.

SSR Mining has an estimated earnings growth rate of 165.2% for the current year and carries a Zacks Rank #2 (Buy). Its shares have shot up roughly 92% in the past year.

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