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Albemarle (ALB) Well Placed on Lithium Expansion Actions

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We issued an updated research report on Albemarle Corporation (ALB - Free Report) on Dec 13.

Lithium Expansions to Boost Growth

Albemarle is well placed to gain from strength in the lithium business. The company is executing a number of projects to boost the global lithium derivative capacity. Its “Wave I” of lithium production capacity expansion remains on track.

The company’s Talison joint venture (JV) in Australia is expanding lithium concentrate production at the Greenbushes mine. The move is likely to double the lithium carbonate equivalent capacity at Greenbushes from 80,000 metric tons per year to more than 160,000 metric tons.

Moreover, Albemarle agreed to pay $1.15 billion for a 50% stake in a proposed JV with Mineral Resources to own and operate the Wodgina hard rock lithium mine in Australia. It will also develop an integrated lithium hydroxide operation at the resource site.

Albemarle will manage the marketing and sales of lithium hydroxide through the JV. The JV will combine world-class lithium production and marketing expertise with Mineral Resources’ leading mining capabilities along with regional presence.

Cash Deployment

Albemarle is committed to deliver incremental returns to shareholders. In February 2018, the company hiked quarterly dividend by 5% to 33.5 cents per share, marking the 24th consecutive year of dividend increase.

In August, the company initiated a new accelerated share repurchase program worth $250 million, which is expected to be complete by the end of 2018. The company has bought back roughly 4.7 million shares during the first nine months of 2018.

Price Performance

Albemarle has outperformed the industry in the past six months. The stock has lost 5.8% compared with the industry’s 20.3% decline.



Healthy Growth Prospects

In November, Albemarle maintained guidance for 2018. It continues to expect adjusted earnings per share (EPS) for 2018 in the band of $5.30-$5.50, marking year-over-year increase of 15-20%. The company also projects net sales for 2018 between $3.3 billion and $3.5 billion and adjusted EBITDA in the range of $990-$1,020 million.

The Zacks Consensus Estimate for Albemarle’s 2018 earnings is currently pegged at $5.43, reflecting expected year-over-year growth of 18.3%. Moreover, earnings are expected to register 12.5% growth in 2019. The company also has an expected long-term EPS growth rate of 16.3%, higher than the industry average of 12.5%.

Albemarle Corporation Price and Consensus

 

Albemarle Corporation Price and Consensus | Albemarle Corporation Quote

 

Zacks Rank & Other Stocks to Consider

Albemarle currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are CF Industries Holdings, Inc. (CF - Free Report) and Nexeo Solutions, Inc. , both sporting a Zacks Rank #1 (Strong Buy); along with The Mosaic Company (MOS - Free Report) , carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6%. The company’s shares have moved up 1.3% in the past year.

Nexeo Solutions has an expected long-term earnings growth rate of 30.6%. Its shares have gained 4.2% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have rallied 24% in the past year.

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