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Albemarle (ALB) Scales New 52-Week High on Bright Prospects


Shares of chemicals maker Albemarle ALB scaled a fresh 52-week high of $112.82 yesterday, before pulling back to close the day at $112.05.

Albemarle has a market cap of roughly $12.4 billion and average volume of shares traded in the last three months is around 1,053.7K. The company has an expected long-term EPS growth of around 14.5%.

Albemarle has significantly outperformed the Zacks categorized Chemicals-Diversified industry over a year, partly reflecting its forecast-topping earnings performance and its strategic growth initiatives. The company’s shares have gained around 47.1% over this period, compared with roughly 17.5% gain recorded by the industry.

Driving Factors

Albemarle's adjusted earnings of $1.05 per share for first-quarter 2017 topped the Zacks Consensus Estimate of 95 cents. Revenues of $722.1 million also beat the Zacks Consensus Estimate of $678.7 million.

Albemarle has an impressive earnings surprise history, outpacing the Zacks Consensus Estimate in all the trailing four quarters, delivering a positive average earnings surprise of around 9%.

The company, in its first-quarter call, noted that it is more optimistic about 2017 based on a strong start in Lithium and Bromine Specialties and favorable outlook for both businesses.

Albemarle also raised its sales and earnings outlook for 2017. The company now sees net sales in the band of $2.9–$3.05 billion (up from $2.8–$2.95 billion expected earlier) and adjusted earnings per share of between $4.20 and $4.40 (up from previous estimate of $4.00–$4.25 per share) for 2017.

Albemarle remains focused on strengthening its lithium business. It is well placed to leverage strong expected growth in the battery-grade lithium market. The company’s Talison joint venture in Australia has approved the expansion of lithium concentrate production at its Greenbushes mine. The expansion will more than double the lithium carbonate equivalent capacity at Greenbushes from 80,000 metric tons per year to more than 160,000 metric tons.

Moreover, the acquisition of the lithium assets of Jiangxi Jiangli New Materials Science and Technology Co. Ltd. has allowed Albemarle to supply premium lithium salts to an expanded global customer base and accelerated the company’s ability to meet its goal of capturing 50% of the growth in the lithium industry.

Moreover, Albemarle, earlier this year, agreed to amend its lithium production rights agreement with the Chilean Economic Development Agency to extend the term of the deal and increase the company's authorized lithium quota at its facility in the Salar de Atacama, Chile.

The amended agreement offers Albemarle with adequate lithium to make more than 80,000 metric tons of technical and battery grade lithium salts annually over the next 27 years at the company’s expanding battery grade manufacturing plants in La Negra, Antofagasta. The agreement will also allow Albemarle to further support growth of its long-term customers in the energy storage market and other high growth applications.

Albemarle is also selling non-core businesses and assets to boost growth opportunities and focus on its key businesses. As part of this move, the company has sold its Chemetall Surface Treatment unit to German chemical giant BASF BASFY for around $3.2 billion. The sale is a part of Albemarle's sustained commitment to boost shareholder value by investing in the growth of its high priority businesses.

Albemarle Corporation Price and Consensus

Albemarle Corporation Price and Consensus | Albemarle Corporation Quote

Zacks Rank & Key Picks

Albemarle currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the chemical space include The Chemours Company CC and Kronos Worldwide, Inc. KRO, both holding a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term growth of 15.5%.

Kronos has an expected long-term growth of 5%.

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