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Why Is Albemarle (ALB) Down 2.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Albemarle (ALB - Free Report) . Shares have lost about 2.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Albemarle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Albemarle Tops Q2 Earnings Estimates, Raises FY18 View

Albemarle saw its profits jump in the second quarter of 2018 on the back of strong gains in its Lithium unit. The chemical maker posted a profit of $302.5 million, or $2.73 per share in the quarter, a roughly three-fold surge from a profit of $103.3 million or 92 cents per a year ago. The bottom line in the reported quarter was also boosted by gains on divestment of the polyolefin catalysts and components portion of the PCS business.

Barring one-time items, adjusted earnings for the reported quarter were $1.36 per share, topping the Zacks Consensus Estimate of $1.28.

Revenues rose around 16% year over year to $853.9 million in the reported quarter. It also surpassed the Zacks Consensus Estimate of $799.5 million. Sales in the quarter were aided by higher volumes and pricing as well as favorable currency impacts across the company’s businesses.

Segment Highlights

Sales from the Lithium unit jumped around 30% year over year to $317.6 million in the reported quarter, supported by favorable pricing, higher sales volumes and favorable currency impacts. Adjusted EBITDA climbed roughly 23% year over year to $141.6 million.

The Bromine Specialties segment raked in sales of $220.5 million, up around 8% year over year, driven by favorable pricing, higher volumes and currency impacts. Adjusted EBITDA was $69.4 million, up around 12% year over year.

The Catalysts unit reported revenues of $285 million in the reported quarter, up roughly 10% year over year. The division’s sales were supported by higher volumes, favorable pricing and positive currency impacts. Adjusted EBITDA was $75.1 million, up roughly 11% year over year.

Financial Position

Albemarle ended the quarter with cash and cash equivalents of roughly $908.1 million, down roughly 10% year over year. Long-term debt was $1,406.7 million, down around 1% year over year.

Cash flow from operations was roughly $223.9 million for the first half of 2018, compared with cash outflow from operations of around $54.5 million for the same period a year ago. Capital expenditures were $280.9 million for the first half, up from $97.8 million a year ago.

Outlook

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 $5.30-$5.50 per share (up from earlier view of $5.10-$5.40), a year-over-year increase of 15.

The company now envisions net sales for 2018 to be between $3.3 billion and $3.5 billion, up from $3.2 billion and $3.4 billion it expected earlier. Adjusted EBITDA for the year has been forecast in the range of $990 million to $1,020 million.
 

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Albemarle has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Albemarle has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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