What happened
Shares of Albemarle (ALB 1.71%) rose over 11% today after the company reported fourth-quarter and full-year 2019 operating results. The world's largest lithium producer actually missed Wall Street expectations on both revenue and adjusted earnings per share (EPS) during the fourth quarter. It also issued full-year 2020 guidance that expects revenue, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), and adjusted EPS to fall compared to 2019 results.
The nuance here is that the misses aren't that important in the grand scheme of things. Also, Albemarle had been handed an unsustainably low valuation after shares tumbled throughout 2018 and 2019. Investors have recently picked up on that and have boosted shares by nearly 30% since the beginning of 2020.
As of 2:39 p.m. EST, the dividend stock had settled to a 6.3% gain.
Image source: Getty Images.
So what
Albemarle delivered a solid year of operations in 2019. All three reportable segments -- lithium, bromine specialties, and catalysts -- performed well.
Margins were impacted by foreign currency exchange rates and higher input costs, but the business remains comfortably profitable. The company achieved an operating margin of 18.5% last year, compared to 20.8% in 2018 (excluding gains from the sale of a business).
However, in recent months Albemarle has prepared investors for a down year in 2020. It issued full-year 2020 guidance in line with those expectations:
|
Metric |
Full-Year 2020 Guidance |
Full-Year 2019 Actual |
Change |
|---|---|---|---|
|
Revenue |
$3.48 billion to $3.53 billion |
$3.59 billion |
(2% to 3%) |
|
Adjusted EBITDA |
$880 million to $930 million |
$1.04 billion |
(10% to 15%) |
|
Adjusted EPS |
$4.80 to $5.10 |
$6.04 |
(16% to 21%) |
Data source: Company press release.
Now what
Despite expectations for a slow year in 2020, Albemarle is well-positioned for the long haul. After all, it owns the world's best lithium resources, and the world is going to have quite the appetite for lithium in the 2020s. In the meantime, investors will be awaiting the potential sale of specific assets before the end of this year, and progress toward achieving free-cash-flow-positive operations in 2021.
