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Here's Why You Should Retain Albemarle (ALB) in Your Portfolio
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Albemarle Corporation (ALB - Free Report) is gaining from higher lithium volumes on strong demand, capacity expansion and productivity actions amid headwinds from the softness in the specialties unit.
Shares of Albemarle are down 38.1% in a year compared with 6.7% rise of the industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Higher Lithium Demand, Expansion Moves Aid ALB
Albemarle is benefiting from higher volumes in its lithium business. Increased customer demand, capacity expansion and improvements in plant productivity are contributing to higher volumes.
This North Carolina-based company saw higher volumes in the Energy Storage unit in the second quarter of 2023, primarily driven by the expansion of La Negra III/IV in Chile and a surge in tolling volumes to meet the growing demand from customers. Production from the processing plant in Qinzhou, China also contributed to the volume growth.
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 is also progressing through the commissioning phase. Kemerton III and IV projects have also been moved into execution. Moreover, the Qinzhou plant in China will also boost the growth of conversion capacity and drive lithium volumes. Mechanical completion of the Meishan facility is also expected in early 2024. The Salar yield improvement project has also moved into the commissioning phase.
The company recently secured a $90-million grant from the U.S. Department of Defense to support the expansion of domestic mining and lithium production for the nation's battery supply chain. The grant will be instrumental in acquiring a fleet of mining equipment, a crucial component of Albemarle's strategy to reopen its lithium mine in Kings Mountain, NC. ALB sees that the Kings Mountain mine will become operational as early as late 2026, subject to permitting processes.
Albemarle is also benefiting from cost-saving and productivity initiatives. It sees $250 million in productivity benefits over 2023 and 2024 through operational discipline. The company’s cost actions are expected to support its margins in 2023.
Weakness in Specialties a Concern
The company’s Specialties unit is exposed to headwinds from demand weakness. Sales from the segment tumbled around 20% year over year in the second quarter, hurt by lower volumes and pricing related to weakness in certain end markets.
The segment faces demand headwinds in consumer and industrial electronics and elastomers markets. The demand weakness is expected to continue in the third quarter of 2023. Albemarle has reduced its adjusted EBITDA outlook for the segment for 2023 factoring in the demand softness.
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Hawkins, Inc. (HWKN - Free Report) and Alamos Gold Inc. (AGI - Free Report) .
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 77% in a year.
Hawkins currently carrying a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 50% in a year.
Alamos Gold currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for AGI's current-year earnings has been revised 7.5% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents, implying year-over-year growth of 53.6%. AGI shares have gained around 69% in a year.
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Here's Why You Should Retain Albemarle (ALB) in Your Portfolio
Albemarle Corporation (ALB - Free Report) is gaining from higher lithium volumes on strong demand, capacity expansion and productivity actions amid headwinds from the softness in the specialties unit.
Shares of Albemarle are down 38.1% in a year compared with 6.7% rise of the industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Higher Lithium Demand, Expansion Moves Aid ALB
Albemarle is benefiting from higher volumes in its lithium business. Increased customer demand, capacity expansion and improvements in plant productivity are contributing to higher volumes.
This North Carolina-based company saw higher volumes in the Energy Storage unit in the second quarter of 2023, primarily driven by the expansion of La Negra III/IV in Chile and a surge in tolling volumes to meet the growing demand from customers. Production from the processing plant in Qinzhou, China also contributed to the volume growth.
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 is also progressing through the commissioning phase. Kemerton III and IV projects have also been moved into execution. Moreover, the Qinzhou plant in China will also boost the growth of conversion capacity and drive lithium volumes. Mechanical completion of the Meishan facility is also expected in early 2024. The Salar yield improvement project has also moved into the commissioning phase.
The company recently secured a $90-million grant from the U.S. Department of Defense to support the expansion of domestic mining and lithium production for the nation's battery supply chain. The grant will be instrumental in acquiring a fleet of mining equipment, a crucial component of Albemarle's strategy to reopen its lithium mine in Kings Mountain, NC. ALB sees that the Kings Mountain mine will become operational as early as late 2026, subject to permitting processes.
Albemarle is also benefiting from cost-saving and productivity initiatives. It sees $250 million in productivity benefits over 2023 and 2024 through operational discipline. The company’s cost actions are expected to support its margins in 2023.
Weakness in Specialties a Concern
The company’s Specialties unit is exposed to headwinds from demand weakness. Sales from the segment tumbled around 20% year over year in the second quarter, hurt by lower volumes and pricing related to weakness in certain end markets.
The segment faces demand headwinds in consumer and industrial electronics and elastomers markets. The demand weakness is expected to continue in the third quarter of 2023. Albemarle has reduced its adjusted EBITDA outlook for the segment for 2023 factoring in the demand softness.
Albemarle Corporation Price and Consensus
Albemarle Corporation price-consensus-chart | Albemarle Corporation Quote
Stocks to Consider
Better-ranked stocks worth a look in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Hawkins, Inc. (HWKN - Free Report) and Alamos Gold Inc. (AGI - Free Report) .
The Zacks Consensus Estimate for current fiscal-year earnings for CRS is currently pegged at $3.48, implying year-over-year growth of 205.3%. Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carpenter Technology has a trailing four-quarter earnings surprise of roughly 10%, on average. The stock has rallied around 77% in a year.
Hawkins currently carrying a Zacks Rank #1. It has a projected earnings growth rate of 18.9% for the current year.
Hawkins has a trailing four-quarter earnings surprise of roughly 25.6%, on average. HWKN shares are up around 50% in a year.
Alamos Gold currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for AGI's current-year earnings has been revised 7.5% upward over the past 60 days.
The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents, implying year-over-year growth of 53.6%. AGI shares have gained around 69% in a year.