Albemarle Corporation ALB is benefiting from higher lithium volumes on project ramp-ups, capacity expansion and productivity actions amid challenges from lower lithium pricing and softness in the Specialties unit.
ALB stock is down 55% over a year compared with a 7.8% decline of the industry.
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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Lithium Project Expansion Actions & Productivity Aid Albemarle
Albemarle is well-placed to gain from long-term growth in the battery-grade lithium market. The market for lithium batteries and energy storage remains strong, especially for electric vehicles (EVs), offering significant opportunities for the company to develop innovative products and expand capacity. Lithium demand is expected to grow on significant global EV penetration.
The company is strategically executing its projects aimed at boosting its global lithium conversion capacity. It remains focused on investing in high-return projects to drive productivity. Healthy customer demand, capacity expansion and plant productivity improvements are supporting its volumes.
ALB saw higher sales volumes in its Energy Storage unit in the second quarter of 2024 driven by the ramp-up of lithium projects, including the La Negra expansion in Chile and the processing plant in Qinzhou, China. Albemarle is currently focusing on the optimization and ramp-up of Kemerton I lithium hydroxide conversion plant in Australia. The Salar yield improvement project in Chile has also achieved a 50% operating rate. The Meishan lithium conversion facility in China has also delivered its first commercial sales ahead of schedule.
Albemarle is also benefiting from cost-saving and productivity initiatives. The company delivered more than $150 million in restructuring and productivity benefits in the second quarter and is on track to surpass its initial productivity target for 2024 by roughly 50%. ALB is taking actions to maintain its competitive position including the initiation of a comprehensive review of cost and operating structure, optimization of the conversion network and reduction of capital expenditure.
Soft Lithium Prices and Headwinds in Specialties Ail ALB
Weaker lithium market prices are weighing on the company’s performance. ALB’s revenues tumbled roughly 40% year over year to $1,430.4 million in the second quarter, hurt by lower prices. Sales from its Energy Storage unit fell around 53% due to lower lithium market prices. Lithium prices have declined amid slowing demand growth for EVs, inventory glut and increased supply. The uncertain macroeconomic environment and high interest rates have weighed on demand. Weaker lithium prices are likely to continue to hurt the company’s results in the third quarter.
ALB’s Specialties unit is exposed to headwinds from demand and pricing weakness. Sales from the segment fell around 10% year over year in the second quarter. The segment faces demand headwinds in the consumer electronics market. The demand weakness is expected to continue in the third quarter. Albemarle has lowered its adjusted EBITDA outlook for the Specialties unit factoring in slower-than-expected market recovery and higher logistics costs related to the ongoing conflict in the Middle East. It now sees an adjusted EBITDA of $210-$260 million for the segment.
Albemarle Corporation Price and Consensus
Albemarle Corporation price-consensus-chart | Albemarle Corporation Quote
Stocks to Consider
Better-ranked stocks in the Basic Materials space are Newmont Corporation NEM, Element Solutions Inc ESI and Eldorado Gold Corporation EGO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Newmont’s current-year earnings is pegged at $2.82, indicating a rise of 75.2% from year-ago levels. The Zacks Consensus Estimate for NEM’s earnings has increased 16% in the past 60 days. The stock has rallied around 34% in the past year.
The consensus estimate for Element Solutions’ current-year earnings has increased by 0.7% in the past 60 days. ESI beat the consensus estimate in three of the last four quarters while delivering in-line results on the other occasion. In this timeframe, it delivered an earnings surprise of around 3.8%, on average.
The Zacks Consensus Estimate for Eldorado Gold’s current year earnings is pegged at $1.35 per share, indicating a year-over-year rise of 136.8%. EGO beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 430.3%. The company's shares have rallied roughly 93% in the past year.
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