Why Is Albemarle (ALB) Up 33.9% Since Last Earnings Report?

It has been about a month since the last earnings report for Albemarle (ALB). Shares have added about 33.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Albemarle due for a pullback? 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's Q1 Earnings Top Estimates, Revenues Lag

Albemarle recorded a profit of $107.2 million or $1.01 per share in the first quarter of 2020, down around 20% from $133.6 million or $1.26 per share it earned a year ago.

Adjusted earnings for the reported quarter were $1.00 per share, down from $1.23 a year ago. It topped the Zacks Consensus Estimate of 85 cents.

Revenues fell roughly 11% year over year to $738.8 million in the quarter. It missed the Zacks Consensus Estimate of $777.9 million. The company saw lower sales across its segments in the quarter.

Segment Highlights

Sales from the Lithium unit dropped around 19% year over year to $236.8 million in the reported quarter, hurt by lower sales volumes and pricing. Adjusted EBITDA was down roughly 32% year over year to $78.6 million.

The Bromine Specialties segment recorded sales of $231.6 million, down 7% year over year. Reduced volumes due to logistics challenges more than offset higher pricing. Adjusted EBITDA was $83.3 million, up around 6% year over year.

The Catalysts unit recorded revenues of $207.2 million in the reported quarter, down roughly 18% year over year, hurt by lower volumes. Adjusted EBITDA was $47.5 million, down roughly 21% year over year. The company saw lower volumes in FCC due to reduced transportation fuel consumption.

Financial Position

Albemarle ended the quarter with cash and cash equivalents of roughly $553.2 million, up roughly 19% year over year. Long-term debt more than doubled year over year to around $3,105.2 million.

Cash flow from operations was $155 million for the quarter, up nearly three fold year over year. Capital expenditures were $214.5 million for the quarter.

Outlook

Albemarle has withdrawn its guidance for full-year 2020 due to uncertainties around the duration and economic impacts of the coronavirus pandemic. For the second quarter of 2020, the company expects its performance to be lower year-over-year based on lower global economic activities resulting from the pandemic.

The company expects net sales for the second quarter to be between $700 million and $775 million. Moreover, adjusted EBITDA for the quarter has been forecast in the range of $140-$190 million.

The company is also accelerating its $100 million cost savings program and expects to realize $50-$70 million of savings this year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -20.17% due to these changes.

VGM Scores

Currently, Albemarle has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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. It's no surprise Albemarle has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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