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Why Is Albemarle (ALB) Down 13.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Albemarle (ALB - Free Report) . Shares have lost about 13.9% 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 catalysts.

Albemarle’s Q3 Earnings Top Estimates, Revenues Lag

Albemarle saw its profits rise in the third quarter of 2018. The company posted a profit of $129.7 million, or $1.20 per share in the quarter, a roughly 9% increase from $118.7 million or $1.06 per share year ago. The bottom line in the reported quarter was supported by higher lithium prices and earnings growth across the company’s Bromine Specialties and Catalysts units.

Barring one-time items, adjusted earnings for the reported quarter were $1.31 per share, topping the Zacks Consensus Estimate of $1.25.

Revenues rose around 3% year over year to $777.7 million in the quarter. It trailed the Zacks Consensus Estimate of $804.4 million.

Revenues, in the reported quarter, were aided by favorable pricing across the board and increased sales volumes in Bromine Specialties and Catalysts. This was, in part, offset by reduced volumes in lithium due to shut downs at three of Albemarle’s manufacturing sites and the impact of the divestment of the polyolefin catalysts and components portion of the PCS business.

Segment Highlights

Sales from the Lithium unit edged up around 0.6% year over year to $270.9 million in the reported quarter as higher pricing offset lower sales volumes. Adjusted EBITDA inched up roughly 0.6% year over year to $113.6 million.

The Bromine Specialties segment raked in sales of $232.6 million, up around 9% year over year, driven by favorable pricing and higher volumes. Adjusted EBITDA was $78.6 million, up around 23% year over year.

The Catalysts unit logged revenues of $251.1 million in the reported quarter, up roughly 3% year over year on the back of higher volumes and favorable pricing. Adjusted EBITDA was $62.6 million, up roughly 4% year over year.

Financial Position

Albemarle ended the quarter with cash and cash equivalents of roughly $641.2 million, down roughly 39% year over year. Long-term debt was $1,411.6 million, essentially stable year over year.

Cash flow from operations was roughly $376.9 million for the first nine months of 2018, compared with cash flow from operations of around $74.8 million for the same period a year ago. Capital expenditures were $471.7 million for the same period, up from $187.5 million a year ago owing to expansion actions in lithium.

Outlook

Albemarle backed its guidance for 2018. The company continues to see adjusted earnings for the year to be in the band of $5.30-$5.50 per share, a year-over-year increase of 15.

The company also envisions net sales for 2018 to be between $3.3 billion and $3.5 billion. 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 a downward trend in fresh estimates.

VGM Scores

At this time, Albemarle has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Albemarle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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