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Why Is Albemarle (ALB) Up 11.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Albemarle (ALB). Shares have added about 11.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Albemarle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Albemarle’s Earnings Surpass Estimates in Q2, Sales Lag

Albemarle recorded a profit of $424.6 million or $3.62 per share in the second quarter of 2021, up from $85.6 million or 80 cents per share it earned a year ago. The bottom line in the reported quarter includes a gain on the sale of the Fine Chemistry Services business.

Adjusted earnings for the reported quarter were 89 cents per share, up from 86 cents a year ago. It topped the Zacks Consensus Estimate of 83 cents.

Revenues rose roughly 1% year over year to $773.9 million in the quarter. It missed the Zacks Consensus Estimate of $787.1 million. The top line was aided by higher sales from the company's Lithium and Bromine business segments.

Segment Highlights

Sales from the Lithium unit rose around 13% year over year to $320.3 million in the reported quarter, aided by higher volumes (up 17%) that more than offset lower pricing. Prices fell 4% due to lower carbonate and technical grade product pricing. Adjusted EBITDA was up roughly 16% year over year to $109.4 million, aided by higher sales.

The Bromine Specialties segment recorded sales of $279.7 million, up around 20% year over year. Sales were supported by higher demand for products across the portfolio and improved volumes and pricing. Adjusted EBITDA was $92.6 million, up around 27% year over year. The company’s cost-savings initiatives and pricing offset higher raw materials costs.

The Catalysts unit recorded revenues of $148.3 million in the reported quarter, down around 25% year over year, hurt by lower volumes. Prices were flat in the quarter. FCC volumes fell modestly, impacted by a change in order patterns from a large North American customer. Adjusted EBITDA was $21.2 million, down roughly 7% year over year, impacted by lower sales.

Financial Position

Albemarle ended the quarter with cash and cash equivalents of roughly $823.6 million, up around 12% year over year. Long-term debt was $2,043.8 million, down around 35% year over year.

Cash flow from operations was $385.9 million for the six months ended Jun 30, 2021, up around 86% year over year.

Outlook

Moving ahead, Albemarle expects its performance for full-year 2021 to improve modestly on a year-over-year basis on a sustained recovery in global economic activities.

The company expects net sales for 2021 to be between $3.2 billion and $3.3 billion. It sees higher Lithium sales and improving trends in Catalysts. However, expectations for the Bromine business are reduced due to an increase in raw material costs and supply chain disruptions.

Moreover, Albemarle now sees adjusted earnings per share for 2021 in the band of $3.35-$3.70, up from its prior view of $3.25 to $3.65.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -10.18% due to these changes.

VGM Scores

At this time, Albemarle has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Albemarle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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