Stock in
Albemarle
started lower Thursday but ended in the green as investors considered solid financial results from the miner and weighed up when lithium prices might stop falling.
On Wednesday evening, Albemarle reported earnings of $1.85 per share from sales of $2.4 billion, while Wall Street had been looking for EPS of 98 cents from sales of $2.2 billion.
Those numbers were down from the year-earlier results of $8.62 in EPS and sales of $2.6 billion, but much better than expected.
Still, the shares fell more than 5% in premarket trading before rebounding to close with a 2.6% gain at $117.50. It was a roughly $10 swing in the share price. The
S&P 500
rose 0.6% and the
Nasdaq Composite
gained 0.3%.
The outlook could have something to do with the volatility. Albemarle provided a wide range of financial forecasts that depend on several different scenarios for lithium prices. Earnings before interest, taxes, depreciation, and amortization, or Ebitda, could come in from $700 million to $2.3 billion in 2024, while Wall Street projects $1.2 billion, down from about $2.4 billion in 2023.
Albemarle’s numbers depend on benchmark lithium prices per metric ton averaging from $15,000 to $25,000. Prices are currently about $14,000 per ton, while a year ago, they were closer to $63,000.
Albermarle CEO Kent Masters was careful not to call the forecasts in its news release guidance. He thinks of them more like scenarios, which is probably a good way to frame it.
The entire lithium mining industry has been forced to live with incredible volatility. Prices hit almost $85,000 a metric ton in November 2022. They ended 2023 below $14,000 a ton.
Lithium is a key component in the lithium-ion batteries that power electric vehicles. More EVs are being sold, but the mining industry reacted to high lithium prices by producing too much of it. Too much of any commodity will push prices lower.
ISI Evercore analyst Stephen Richardson called Albemarle’s quarter complex, but said in a Wednesday report that the scenarios should help investors evaluate the stock. He also believes lithium prices are near a trough.
“Interesting to us, this distress for the blue-chip lower-cost operator [Albemarle] in global lithium signals even more pain elsewhere in the supply chain,” added the analyst. “Protecting shareholder value to survive and thrive on the other side of the price correction is likely the next focus point.”
Albemarle plans to spend less on expansion in 2024. The company spent $2.1 billion on plants and equipment in 2023, with roughly $1 billion of that for growth. Capital spending will fall to about $1.7 billion with roughly $600 million for growth this year.
Capital efficiency and cost controls are the focus for Albemarle—and other commodity-business managers—when the cycle turns.
Richardson rates Albemarle stock at Buy with a $190 price target. Overall, about 63% of analysts rate shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.
The average analyst price target for Albemarle stock is about $155.
Through Thursday trading, Albemarle stock had fallen about 59% over the past 12 months. Shares of smaller capitalization miners
Lithium Americas
and
Piedmont Lithium
are down about 55% and 81%, respectively, over the same span.
Write to Al Root at [email protected]
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