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Albemarle Downgraded to Strong Sell

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On Sep 14, Zacks Investment Research downgraded chemical company Albemarle Corporation (ALB - Free Report) to a Zacks Rank #5 (Strong Sell).

Why Downgraded?

Albemarle posted disappointing second-quarter 2013 results on Jul 17. The company reported adjusted earnings (excluding non-operating items) of 97 cents a share in the quarter compared with $1.28 a share earned in the year-ago quarter. The results were below the Zacks Consensus Estimate of 99 cents.

The company delivered negative earnings surprises in two of the last four quarters, but it recorded an average positive surprise of 3.01% for the last four quarters.

Revenues decreased 7.4% to $634.2 million in the quarter from $684.9 million in the year-ago quarter, missing the Zacks Consensus Estimate of $660 million. The results were impacted by Albemarle’s exit from the phosphorus flame retardants business, lower metals surcharges, unfavorable pricing in bromine portfolio and lower Fine Chemistry Services volumes, partly offset by favorable volumes in Refinery Catalysts and Brominated Flame Retardant businesses.

Net sales in the Fine Chemistry segment slipped 16% to $176.1 million in the second quarter from $208.1 million in the previous-year quarter primarily due to unfavorable sales volumes and pricing. Net sales in the polymer solutions segment also slipped 9% to $224.3 million due to phosphorus flame retardants business exit in the second quarter of 2012 and overall lower flame retardant pricing, partly offset by favorable flame retardants volumes.

Sluggish economic environment across Europe, weak electronics and construction markets, and lower metals surcharges at the beginning of 2013 impacted Albemarle’s performance. However, Albemarle successfully met several key milestones with the bromine and organometallics expansions, which are expected to be beneficial to the company on a long-term basis.

The Zacks Consensus Estimate for 2013 for Albemarle has gone down 10.8% to $4.22 per share as most estimates were revised lower over the last 60 days. Similarly, the Zacks Consensus Estimate for 2014 has decreased 9.3% to $4.98 per share.

Other Stocks to Consider

Other chemical companies with favorable Zacks Rank are Akzo Nobel (AKZOY - Free Report) , Ferro Corp. (FOE - Free Report) and Eastman Chemical Co. (EMN - Free Report) . All of them carry a Zacks Rank #2 (Buy).

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