Albemarle stock is expected to experience volatility following the release of its second-quarter earnings report. The fluctuations in the price of lithium are the primary reason behind this anticipated turbulence.
The growing demand for electric vehicles has led to significant fluctuations in lithium prices in recent years. Prior to the pandemic, the benchmark price of lithium reached a low of $5,000 per metric ton. However, in November, it skyrocketed to almost $90,000. In the second quarter of this year, prices averaged around $32,000, down from nearly $50,000 in the previous quarter.
The declining prices have had a negative impact on Albemarle’s earnings. In the first quarter, the company reported earnings per share of $10.32 from sales of $2.6 billion. However, in the second quarter of 2022, the per-share earnings dropped to $3.45 from sales of $1.5 billion. Wall Street analysts expect earnings per share of $4.48 from sales of $2.4 billion in the second quarter of 2023.
Baird analyst Ben Kallo highlighted the sensitivity of Albemarle stock to lithium pricing in their preview of the company’s earnings report. Investors are closely monitoring the lithium market and its impact on Albemarle’s financial performance.
According to Kallo, the first-quarter selloff in lithium will likely be reflected in Albemarle’s second-quarter results due to contractual lag. The analyst also pointed out that any increase in the spot price of lithium could positively affect Albemarle’s estimates.
Kallo maintains a Buy rating on the stock with a price target of $288 per share.
On Tuesday, Albemarle stock closed down approximately 2% at $207.99, while the S&P 500 experienced a 0.2% decline and the Dow Jones Industrial Average increased by 0.2%. Reports of Exxon Mobil’s talks with automakers regarding lithium supply may have contributed to the pressure on Albemarle’s shares.
During Albemarle’s earnings conference call scheduled for Thursday at 9 a.m. Eastern time, there may be discussions about competition from oil companies. Guidance for the company’s future performance is also expected to be addressed. Management previously projected sales for 2023 to range between $9.8 billion and $11.5 billion, compared to their initial projection of $11.3 billion to $12.9 billion in February. Earnings per share are expected to range between $20.75 and $25.75, compared to the previous estimate of $26 to $33.
The volatile nature of lithium pricing has made it difficult for Albemarle to accurately predict its financial results.
