Albemarle Corporation’s (ALB - Free Report) stock looks promising at the moment. The company’s shares are up 10.3% quarter to date, outperforming the industry’s gain of 4.1%.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Let’s take a look into the factors that make this chemical company an attractive investment option.
What’s Working in Favor of Albemarle?
Solid Rank & VGM Score: Albemarle currently has a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
Strong Q1 and Upbeat Outlook: Albemarle saw its profits surge in the first quarter of 2018, buoyed by strong gains in its Lithium unit. The company posted a profit of $131.8 million or $1.18 per share in the quarter, a roughly two-and-a-half fold jump on a year over year basis. Adjusted earnings of $1.30 per share for the quarter outstripped the Zacks Consensus Estimate of $1.20.
Revenues rose around 14% year over year to $821.6 million in the reported quarter, topping the Zacks Consensus Estimate of $807 million. Sales in the quarter were aided by favorable pricing and currency impacts and higher sales volumes, mainly in the Lithium division.
Sales from the Lithium unit jumped around 38% year over year in the first quarter, supported by favorable pricing, higher sales volumes and favorable currency impacts.
Albemarle raised its adjusted earnings per share outlook for 2018. The company now sees adjusted earnings for the year to be in the band of $5.10-$5.40 per share (up from earlier view of $5.00 and $5.40), a year-over-year increase of 11%-18%.
The company also sees high-single-digit increase in lithium prices in 2018. It expects the Lithium unit to deliver more than 20% year over year growth in adjusted EBITDA in 2018, driven by improved pricing and strong volumes.
Positive Earnings Surprise History: Albemarle has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 5.5%.
Healthy Growth Prospects: The Zacks Consensus Estimate for earnings for 2018 for Albemarle is currently pegged at $5.22, reflecting an expected year-over-year growth of 13.7%. Moreover, earnings are expected to register a 12.7% growth in 2019. The company also has an expected long-term earnings per share growth of 16.3%, higher than the industry average of 10.3%.
Superior Return on Equity (ROE): Albemarle’s ROE of 13.8%, as compared with the industry average of 9.1%, manifests the company’s efficiency in utilizing shareholder’s funds.
Attractive Valuation: Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Albemarle is currently trading at trailing 12-month EV/EBITDA multiple of 9, cheaper compared with the industry average of 12.9.
Growth Drivers in Place: Albemarle is seeing significant momentum in its lithium business and is well placed to leverage strong expected growth in the battery-grade lithium market. The company is executing a number of projects aimed at boosting its global lithium derivative capacity.
Albemarle, in March, received approval from Chile's Economic Development Agency for an increase in its lithium quota, enabling the company to sustainably expand its lithium production in Chile to roughly 145,000 metric tons of lithium carbonate equivalent per annum through 2043.
Per the company, this increase in quota will be enabled by deploying innovative technology for extracting more lithium without requiring additional brine pumping at the Salar de Atacama, giving it the opportunity to boost capacity in a highly sustainable and efficient manner.
Albemarle is also selling non-core businesses and assets to boost growth opportunities and focus on its key businesses. As part of this move, Albemarle, last month, completed the sale of its polyolefin catalysts and components business to W. R. Grace & Co. for roughly $416 million. The divestment demonstrates Albemarle’s continued commitment toward portfolio management in the best interest of shareholders and employees.
Other Stocks to Consider
Other top-ranked stocks in the basic materials space include The Chemours Company (CC - Free Report) , Huntsman Corporation (HUN - Free Report) and Methanex Corporation (MEOH - Free Report) .
Chemours has an expected long-term earnings growth rate of 15.50% and flaunts a Zacks Rank #1. Its shares have gained roughly 22% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Huntsman has an expected long-term earnings growth rate of 8.3% and flaunts a Zacks Rank #1. The company’s shares have moved up around 27% in a year.
Methanex has an expected long-term earnings growth rate of 15% and carries a Zacks Rank #2. Its shares have rallied roughly 65% over a year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>