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Why Is Albemarle (ALB) Down 4.2% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Albemarle (ALB). Shares have lost about 4.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Albemarle's Earnings & Sales Trounce Estimates in Q4

Albemarle swung to profit in the fourth quarter of 2018. The company 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. The bottom line in the reported quarter was boosted by earnings growth across the company’s Lithium and Bromine Specialties units.

Adjusted earnings for the reported quarter were $1.53 per share (up from $1.34 a year ago), topping the Zacks Consensus Estimate of $1.46.

Revenues rose around 7% year over year to $921.7 million in the quarter. It also surpassed the Zacks Consensus Estimate of $889.9 million.

Revenues, in the reported quarter, were aided by higher sales volumes and favorable pricing across the board that more than offset the impact of the divestment of the polyolefin catalysts and components portion of the Performance Catalyst Solutions business.

FY18 Results

For 2018, profits were $693.6 million or $6.34 per share, up significantly from $54.9 million or 49 cents recorded in 2017.

Net sales for the year went up around 10% year over year to $3,374.9 million on the back of higher sales volumes as well as favorable sales pricing and currency impacts.

Segment Highlights

Sales from the Lithium unit climbed around 18% year over year to $341.6 million in the reported quarter as favorable pricing and higher sales volumes more than offset unfavorable currency impact. Adjusted EBITDA jumped roughly 22% year over year to $144.5 million.

The Bromine Specialties segment logged sales of $239.1 million, up around 9% year over year, driven by favorable pricing and higher volumes. Adjusted EBITDA was $70.2 million, up around 9% year over year.

The Catalysts unit recorded revenues of $304.7 million in the reported quarter, down roughly 2% year over year, impacted by the polyolefin catalysts divestiture and unfavorable currency swings. Adjusted EBITDA was $78.8 million, down roughly 9% year over year.

Financial Position

Albemarle ended 2018 with cash and cash equivalents of roughly $555.3 million, down roughly 51% year over year. Long-term debt was $1,397.9 million, down around 1% year over year.

Cash flow from operations was $546.2 million for 2018 while capital expenditures were $700 million for the full year.

The company retired roughly 5.3 million shares under its accelerated share repurchase program during 2018.

Outlook

The company provided an upbeat outlook for 2019. Albemarle 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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.16% due to these changes.

VGM Scores

Currently, Albemarle has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, 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 D. 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 this revision 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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