Albemarle (ALB) Down 14.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Albemarle (ALB). Shares have lost about 14.3% 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 drivers.

Albemarle Tops Q2 Earnings Estimates, Ups FY19 EPS View

Albemarle recorded a profit of $154.2 million or $1.45 per share in the second quarter of 2019, down 49% from $302.5 million or $2.73 per share it earned year ago.

The bottom line in the year-ago quarter was boosted by $176.7 million (post tax) gain on the divestment of the polyolefin catalysts and components portion of the Performance Catalyst Solutions business.

Adjusted earnings for the reported quarter were $1.55 per share, up 14% year over year. It trounced the Zacks Consensus Estimate of $1.41.

Revenues rose around 4% year over year to $885.1 million in the quarter. It also surpassed the Zacks Consensus Estimate of $876.3 million. Revenues were aided by higher volumes across the company’s lithium and bromine businesses and favorable pricing across the board.

Segment Highlights

Sales from the Lithium unit rose around 2% year over year to $324.8 million in the reported quarter, aided by favorable pricing and higher sales volumes. Adjusted EBITDA was essentially flat year over year at $141.8 million.

The Bromine Specialties segment logged sales of $255.4 million, up around 16% year over year, driven by favorable pricing and higher volumes. Adjusted EBITDA was $81.3 million, up around 17% year over year.

The Catalysts unit recorded revenues of $266.3 million in the reported quarter, down roughly 7% year over year, as lower sales volumes and unfavorable currency impact more than offset favorable pricing. Adjusted EBITDA was $66.9 million, down roughly 11% year over year.

Financial Position

Albemarle ended the quarter with cash and cash equivalents of roughly $398.2 million, down roughly 56% year over year. Long-term debt was $1,398,4 million, down around 0.6% year over year.

Cash flow from operations was $199.3 million for the first half of 2019, down around 11% year over year. Capital expenditures were $415.6 million for the period, up 48% year over year.

Outlook

The company raised its earnings outlook for 2019. It now sees adjusted earnings for 2019 in the band of $6.25-$6.65 per share (up from the prior view of $6.10-$6.50), a year-over-year increase of 13-21%.

The company backed its net sales guidance for 2019 of between $3.65 billion and $3.85 billion, representing 8-14% year over year growth.  It continues to expect adjusted EBITDA for the year in the range of $1,070 million to $1,140 million, representing 6-13% year over year growth.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Albemarle has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 these revisions 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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