Why Livent Stock Just Dropped 8%

Livent's earnings miss was compounded by extremely weak guidance.

Rich Smith
Rich Smith
Feb 12, 2019 at 12:33PM
Energy, Materials, and Utilities

What happened

It's been four months since chemicals giant FMC spun off its lithium-producing subsidiary Livent (NYSE:LTHM) as a separate company. Three months ago, Wall Street bankers who underwrote that transaction urged investors to buy Livent stock -- and I warned investors against taking that advice.

Today, those who took Wall Street's advice are paying the price. Livent reported its fourth-quarter resultsĀ last night, and as of 11:15 a.m. EST, the stock is down 7.5%.

Lithium spodumene rock

This lithium stock is dropping like a rock. Image source: Getty Images.

So what

It's not hard to figure out why.

Wall Street had told investors to expect $0.23 per share in earnings out of Livent in Q4, and sales of $124.3 million. Instead, Livent reported profits of just $0.18 per share, and sales of only $119.8 million.

CEO Paul Graves pointed out that Livent's results were "in line with our prior expectations." That doesn't change the fact, though, that the company's bankers had promised more -- and that Livent failed to deliver.

Now what

And things could get worse before they get better. Issuing new guidance for fiscal Q1 2019, Livent told investors to expect sales in a range of $95 million to $105 million -- $100 million at the midpoint. That's a good 20% below the $124.3 million in sales that Wall Street had been forecasting. Furthermore, Livent's projected Q1 profit of between $0.11 and $0.14 looks like it will fall nearly 50% below analyst projections for $0.24 per share.

Given how bad the numbers look, I'm not at all surprised to see Livent stock falling. And I wouldn't be surprised if it were to fall more.

Check out the latestĀ earnings call transcripts for companies we cover.