Albemarle handily beat Q2 earnings estimates after Wednesday's close, then massively raised its full-year outlook. ALB stock jumped at the open on Thursday, then reversed lower, despite the lithium producer delivered its third big guidance hike in the past three months.
Albemarle is benefiting from "strong demand and pricing trends, particularly for lithium and bromine," CEO Kent Masters said in an earnings statement. "Over the past year, we have shifted our lithium contracting strategy to realize greater benefits from these strong market dynamics."
Albemarle's report followed Livent earnings on Tuesday, which came in well above estimates. The lithium producer also bumped full-year guidance moderately higher. However, LTHM reversed sharply lower after rising early.
Lithium Stocks' Wild Ride
Both Albemarle and Livent had announced huge hikes to their outlook in May, as earnings and sales guidance caught up to a surge in market prices for lithium.
Those huge earnings beats stemmed from the companies recognizing that high lithium market weren't going away any time soon and, particularly for Albemarle, a restructuring of contract prices to more closely reflect market prices.
The Q1 reports, and a subsequent guidance hike from Albemarle on May 23 to reflect more contract renegotiations, propelled LTHM stock to an all-time peak, while ALB rallied to a six-month high.
Then doubt set in. Goldman Sachs went out on a limb, predicting that prices could crash by 70% over the next year as a lithium surplus emerges. But so far, lithium prices are holding strong, up more than 400% from a year ago, even as prices for some key EV materials such as nickel have fallen.
In a July 14 note, Deutsche Bank analyst David Begleiter predicted "another beat and raise" quarter for Albemarle and called for an ALB stock rally into earnings. That's played out, with ALB stock scoring 10% gains in each of the past two weeks to climb within striking distance of a cup-with-handle buy point.
So far, lithium producers are in the driver's seat as battery and EV makers jockey for supply. Livent discussed a new supply agreement reached with General Motors, which will see Livent build out processing capacity in the U.S. That will be key for GM EVs to qualify for tax credits under the Democrats' revamped climate legislation.
Livent said in its earnings statement that GM will make an advance payment of $198 million this year. Auto manufacturers "are becoming more focused on securing reliable lithium supply to support their own aggressive electrification plans," Livent CEO Paul Graves said in the earnings statement.
Albemarle Earnings:
Expectations: Analysts expect Albemarle to post earnings of $3.01, up 238% from a year ago. Revenue is seen jumping 94% to $1.5 billion.
Results: EPS surged 288% to $3.45. Revenue grew 91% to $1.48 billion.
Outlook: Albemarle boosted its guidance range for full-year sales to $7.1-$7.5 billion from $5.8-$6.2 billion. Full-year EPS is now seen in a range of $19.25-$22.25 vs. earlier guidance of $12.30-$15.
Livent Earnings
Expectations: Analysts expect Livent earnings per share to surge to 30 cents in the second quarter vs. 4 cents a year earlier. Revenue is seen vaulting 104% to $208.44 million.
Results: Livent posted Q2 EPS of 37 cents on revenue of $218.7 million.
Outlook: The company raised full-year revenue guidance to a range of $800-$860 million from $755-$835 million. Guidance for adjusted EBITDA rose to $325-$375 million from $290-$350 million.
Livent said an additional 10,000 metric tons of lithium carbonate capacity in Argentina is on track for commercial production by the first quarter of 2023. Also, a 5,000-metric-ton expansion of lithium hydroxide capacity in Bessemer City, N.C., should enter commercial production during Q4. A further 10,000-metric-ton expansion in Argentina by the end of 2023 will nearly double Livent's 2021 capacity.
The company also said it expects to add 15,000 metric tons of capacity in China at a new location by the end of 2023.
Lithium Stocks: LTHM, ALB
ALB stock rose 1.9% to 234.89 on Thursday, after pulling back 1.8% in Wednesday's regular session. ALB stock had been moving back toward a 273.78 buy point from a cup-with-handle base, according to MarketSmith.
LTHM stock lost 1.6% to 23.81, after sliding 6.9% on Wednesday in the wake of earnings. LTHM stock has undercut its 50-day and 200-day lines. Livent stock has fallen 31% from its May 27 peak of 34.61.
