Will Lithium Unit Help Albemarle (ALB) Beat Earnings in Q1?
Albemarle Corporation ALB will release its first-quarter 2018 results after the bell on May 9.
Albemarle swung to a loss on a reported basis in the fourth quarter of 2017, hurt by a sizable income tax expense associated with the new U.S. tax reform laws. However, adjusted earnings of $1.34 per share for the quarter outstripped the Zacks Consensus Estimate of $1.21.
Revenues rose around 23% year over year to $857.8 million in the fourth quarter, also topping the Zacks Consensus Estimate of $791.5 million. Sales in the quarter were aided by favorable impacts of pricing and higher sales volume across the company’s segments as well as favorable currency impacts.
Albemarle has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 6%.
Albemarle’s shares have lost around 8.7% over a year, underperforming the roughly 9.5% gain recorded by the industry.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Albemarle, in its fourth-quarter call, said that it expects adjusted earnings per share for 2018 in the band of $5 to $5.40, a year-over-year increase of 9-18%. It also envisions net sales for 2018 to be between $3.2 billion and $3.4 billion. Adjusted EBITDA has been forecast in the range of $955-$1,005 million.
Albemarle, last month, successfully completed the earlier announced sale of its polyolefin catalysts and components business to W. R. Grace & Co. GRA. Per the terms of the deal, the curatives and organometallics portions of the Performance Catalysts Solutions business remain with Albemarle. Grace will assume the operations and lease at the Product Development Center in Baton Rouge, LA, and operations at the Yeosu site in South Korea.
The divestment demonstrates Albemarle’s continued commitment toward portfolio management in the best interest of shareholders and employees.
The Zacks Consensus Estimate for revenues for Albemarle for the to-be-reported quarter stands at $806.5 million, reflecting an increase of 11.7% from the year-ago quarter.
Strength in the company’s core Lithium and Advanced Materials division boosted its fourth-quarter results. The lithium unit is expected to continue to drive its results in the March quarter.
Albemarle is seeing significant momentum in its lithium business and is well placed to leverage strong expected growth in the battery-grade lithium market. The company is executing a number of projects aimed at boosting its global lithium derivative capacity.
Albemarle, in March, received approval from Chile’s Economic Development Agency for an increase in its lithium quota, enabling the company to sustainably expand its lithium production in Chile to roughly 145,000 metric tons of lithium carbonate equivalent per annum through 2043.
Per the company, this increase in quota will be enabled by deploying innovative technology for extracting more lithium without requiring additional brine pumping at the Salar de Atacama, giving it the opportunity to boost capacity in a highly sustainable and efficient manner.
Sales from the company’s Lithium and Advanced Materials unit jumped 30% year over year to $362.4 million in the fourth quarter, supported by favorable pricing, higher sales volumes and favorable currency impacts. The results in the lithium business are expected to continue to be boosted by favorable pricing trends as well as higher volumes in battery grade products in the first quarter.
Revenues from the Bromine Specialties segment rose around 13% year over year to $219.1 million in the last reported quarter driven by higher sales volumes and favorable pricing. While the division is expected to continue to gain from healthy flame retardant demand in electronics and construction markets, it faces headwinds from higher cost for raw materials, distribution and freight.
Revenues from the Refining Solutions unit rose 24% year over year to $238.4 million in the fourth quarter, supported by favorable pricing, higher sales volumes and favorable currency impacts. The company expects its Catalysts unit (now includes Refining Solutions and Performance Catalyst Solutions) to benefit from higher volumes in fluid cracking catalysts and favorable product mix. However, the unit faces headwind from higher expected input costs.
Our proven model does not conclusively show that Albemarle is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: The Earnings ESP for Albemarle is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at $1.20. 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 #2 which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:
International Flavors & Fragrances Inc. IFF has an Earnings ESP of +0.16% and flaunts a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Univar Inc. UNVR has an Earnings ESP of +2.63% and sports a Zacks Rank #3.
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Albemarle Corporation (ALB): Free Stock Analysis Report
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W.R. Grace & Co. (GRA): Free Stock Analysis Report
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