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Albemarle (ALB) Q2 Earnings Preview: What's in the Cards?

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Albemarle Corporation (ALB - Free Report) will release its second-quarter 2017 results after the bell on Aug 7.
 
The chemical maker’s adjusted earnings of $1.05 per share for first-quarter 2017 topped the Zacks Consensus Estimate of 95 cents. Revenues increased around 17.5% year over year to $722.1 million in the quarter, beating the Zacks Consensus Estimate of $678.7 million.

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 8.97%.

Albemarle has outperformed the industry it belongs to over a year, partly reflecting its forecast-topping earnings performance and its strategic growth initiatives. The company’s shares have rallied around 45.5% over this period, compared with roughly 21.3% gain recorded by the industry.


Let’s see how things are shaping up for this announcement.  

Factors to Consider

Albemarle, in its first-quarter earnings call, said that it is more optimistic about 2017 based on a strong start in Lithium and Bromine Specialties and favorable outlook for both businesses. Strength across these businesses boosted the company’s first-quarter results and is expected to continue to drive its results in the June quarter.

Albemarle, in May, raised sales and earnings guidance for 2017, factoring in more favorable outlook for lithium and bromine. It now expects net sales in the band of $2.9–$3.05 billion (up from $2.8–$2.95 billion expected earlier) and adjusted earnings per share of between $4.20 and $4.40 (up from $4.00–$4.25 per share) for 2017. Adjusted EBITDA for the year is also expected to be between $835 million and $875 million, also an increase from $800–$840 million expected earlier.

Albemarle remains committed to strengthen its lithium business and is well placed to leverage strong expected growth in the battery-grade lithium market. The company, earlier this year, said that its Talison joint venture in Australia has approved the expansion of lithium concentrate production at its Greenbushes mine. The expansion will double the lithium carbonate equivalent capacity at Greenbushes from 80,000 metric tons per year to more than 160,000 metric tons.

The buyout of the lithium assets of Jiangxi Jiangli New Materials Science and Technology Co. Ltd. has also allowed Albemarle to supply premium lithium salts to an expanded global customer base and accelerated the company’s ability to meet its goal of capturing 50% of the growth in the lithium industry.

Albemarle is also selling non-core businesses and assets to boost growth opportunities and focus on its key businesses. As part of this move, the company has sold its Chemetall Surface Treatment unit to German chemical giant BASF (BASFY - Free Report) for around $3.2 billion. Albemarle also divested the tribotecc metal sulfides business to Treibacher Industrie AG. These divestments also led to significant cash generation for Albemarle, allowing it to cut debt and strengthen its balance sheet.

Albemarle Corporation Price and EPS Surprise

 

Albemarle Corporation Price and EPS Surprise | Albemarle Corporation Quote

Earnings Whispers

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 both the Most Accurate Estimate stands and the Zacks Consensus Estimate stand at $1.10. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Albemarle currently carries a Zacks Rank #3, 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 That Warrant a Look

Here are some other companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

International Flavors & Fragrances Inc. (IFF - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sociedad Quimica y Minera de Chile S.A. (SQM - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #2.

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