Lithium miner
Albemarle
smashed Wall Street earnings estimates for the second quarter. The stock is up but not that much, because investors are more focused on the direction of lithium pricing and competition down the road than the quarter just reported.
Still, it was a pretty good quarter. Wednesday evening,
Albemarle
(ticker: ALB) reported adjusted earnings per share of $7.33 from $2.4 billion in sales. Wall Street was looking for earnings per share of $4.48 from sales of $2.4 billion.
Albemarle reported first-quarter earnings per share of $10.32 from sales of $2.6 billion.
The second quarter was an earnings beat, but earnings were still down quarter over quarter. Blame it on lithium pricing. In the second quarter, benchmark lithium prices averaged roughly $32,000, down from almost $50,000 in the first quarter. First-quarter pricing was down from roughly $70,000 a ton in the fourth quarter of 2022.
It’s the fourth-quarter-to-first-quarter price move that likely affected earnings, wrote Ben Kallo in a recent earnings report. He points out there is a lag effect due to how Albemarle writes long-term contracts.
It’s been quite a chore to follow lithium prices and correlate them to Albemarle’s earnings. Prices of lithium, which is used in batteries for electric vehicles, has been all over the place. Before the pandemic, benchmark prices were as low as $5,000 a metric ton. Prices hit almost $90,000 in November.
Rising demand for lithium, due to rising demand for EVs, should mean higher prices, but commodities prices don’t always behave. Inventories, buyer behavior, and new capacity all impact the supply/demand dynamic.
Pricing volatility has wreaked havoc on Albemarle’s guidance. Management now expects to earn between $25 and $29.50 a share in 2023. In May, management said 2023 EPS were expected between $20.75 and $25.75. In February, the range was $26 to $33.
Albemarle stock is up 3.5% in after-hours trading. On Wednesday, the stock closed down about 2.5%, at $202.89; the
S&P 500
dropped 1.4% and the
Dow Jones Industrial Average
fell 1%.
Guidance and lithium pricing as well as supply and demand will be discussed on Albemarle’s quarterly conference call slated for Thursday at 9 a.m. Eastern time.
Competition should come up too. Reports that
Exxon Mobil
(XOM) is in talks with auto makers to supply lithium might have pressured Albemarle shares for the past couple of days.
Volatile lithium pricing has made it tough for Albemarle itself to project results.
Write to Al Root at [email protected]
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