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Albemarle (ALB) Gains on Strong Demand, Capacity Expansion

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Albemarle Corporation (ALB - Free Report) is gaining from higher lithium demand and prices, capacity expansion and cost-saving actions amid challenges from high raw material costs.

The North Carolina-based company’s shares are down 5.1% over a year compared with a 3.6% decline of the industry.

 

Zacks Investment Research
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Albemarle, a Zacks Rank #3 (Hold) stock, is benefiting from higher volumes in its lithium business. Higher customer demand, new capacity and plant productivity improvements are supporting volumes. The La Negra III/IV expansion in Chile is also contributing to higher volumes. Higher lithium prices are also supporting ALB’s performance.

The company is also strategically executing its projects aimed at boosting its global lithium conversion capacity. It remains focused on investing in high-return projects to drive productivity. The company is well placed to gain from long-term growth in the battery-grade lithium market.

Albemarle's Kemerton I lithium hydroxide conversion plant in Western Australia achieved first product in July 2022. Kemerton II has also achieved mechanical completion and the plant is progressing through the commissioning phase. The acquisition of the Qinzhou plant in China will also boost the growth of conversion capacity and drive lithium volumes.

Moreover, the company recently announced that it will set up its lithium mega-flex facility in Chester County, SC. The new hydroxide facility will include an initial investment of $1.3 billion or more, enabling the company to meet the increasing demand for electric vehicles and lithium-ion batteries.  

Albemarle is also benefiting from cost-saving and productivity initiatives. Its cost actions are expected to support its margins in 2023.

However, the company’s Ketjen unit faces headwinds from higher costs. The business is expected witness challenges, in the near term, from increased input costs as well as higher natural gas costs in Europe due to the Russia-Ukraine war. Albemarle expects raw material cost inflation to remain a headwind for this business in 2023. The company’s Specialties unit is also exposed to higher raw material and freight costs.

 

 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include Steel Dynamics, Inc. (STLD - Free Report) , Olympic Steel, Inc. (ZEUS - Free Report) and Linde plc (LIN - Free Report) .

Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for STLD's current-year earnings has been revised 32.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3%, on average. STLD has gained around 24% in a year.

Olympic Steel currently sports a Zacks Rank #1. The Zacks Consensus Estimate for ZEUS's current-year earnings has been revised 33.1% upward in the past 60 days.

Olympic Steel’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2%, on average. ZEUS has rallied around 32% in a year.

Linde currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 2.5% upward in the past 60 days.

Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 5.9% on average. LIN’s shares have gained roughly 12% in the past year.

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