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Albemarle (ALB) Shares Up 12% YTD: What's Driving the Stock?

Anindya Barman

Shares of Albemarle Corporation ALB have gained around 12% year to date. The company has also outperformed its industry’s rise of roughly 8% to over the same time frame.

Albemarle, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $9.1 billion and average volume of shares traded in the last three months is around 1,570.7K. The company has an expected long-term earnings per share growth of 15.1%, higher than the industry average of 12%.

Let’s take a look into the factors that are driving this chemical stock.

What’s Working in ALB’s Favor?

Forecast-topping results in the last reported quarter, upbeat outlook for 2019 and strategic growth initiatives have contributed to the run-up in Albemarle’s shares. Albemarle, last month, posted strong fourth-quarter results with both earnings and revenues topping estimates.

The company swung to profit in the fourth quarter, buoyed by earnings growth across its Lithium and Bromine Specialties units. It posted a profit of $129.6 million or $1.21 per share in the quarter, compared with a loss of $218.4 million or $1.95 per share year ago.

Adjusted earnings for the quarter were $1.53 per share, up from $1.34 a year ago. It also trounced the Zacks Consensus Estimate of $1.46.

The company’s revenues rose around 7% year over year to $921.7 million, also surpassing the Zacks Consensus Estimate of $889.9 million. Revenues were driven by higher sales volumes and favorable pricing across the board.

Albemarle provided an upbeat outlook for 2019. The company, in its fourth-quarter call, said that its performance in 2018 and execution of its lithium growth projects have positioned it for another year of growth in 2019. The company sees adjusted earnings for 2019 in the band of $6.10-$6.50 per share, a year-over-year increase of 11%-19%.

The company also envisions net sales for 2019 to be between $3.65 billion and $3.85 billion, representing a roughly 8-14% year over year growth.  Adjusted EBITDA for the year has been forecast in the range of $1,070 million to $1,140 million, up roughly 6-13% year over year.

The company expects growth in 2019 to be driven by higher volumes in the Lithium unit. It expects Bromine Specialties and Catalysts units to be stable.

Albemarle is seeing significant momentum in its lithium business and is well placed to leverage strong expected growth in the battery-grade lithium market. The company is executing a number of projects aimed at boosting its global lithium derivative capacity.

Albemarle, in late 2018, agreed to pay $1.15 billion for a 50% stake in a proposed joint venture (JV) with Mineral Resources to own and operate the Wodgina hard rock lithium mine in Australia and develop an integrated lithium hydroxide operation at the resource site. The JV combines Albemarle's world-class lithium production and marketing expertise with Mineral Resources’ leading mining capabilities as well as regional presence.

Albemarle also remains committed to deliver incremental returns to shareholders. Its board, last month, declared a 10% hike in its quarterly dividend to 36.75 cents per share. The move marked the 25th straight year that the company has raised quarterly dividend.

The company returned around $145 million to its shareholders through dividends during 2018. It also completed two accelerated share repurchase programs in 2018 worth $500 million.

Albemarle Corporation Price and Consensus

Albemarle Corporation Price and Consensus | Albemarle Corporation Quote

Stocks Worth a Look

Stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Israel Chemicals Ltd. ICL and W. R. Grace & Co. GRA.

Kirkland Lake Gold has an expected earnings growth rate of 47.1% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares have shot up around 118% in the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here .

Israel Chemicals has an expected earnings growth rate of 10.8% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have gained around 23% over the past year.

W. R. Grace has an expected earnings growth rate of 10.4% for the current year and carries a Zacks Rank #2. Its shares have gained roughly 21% in the past year.

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