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Why Livent Corporation Stock Just Dropped 10%

By Rich Smith – May 12, 2020 at 2:46PM

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Instead of a profit, Livent reported a loss.

What happened

Lithium miner Livent Corporation (LTHM -0.20%) reported a big earnings miss last night, and its shares are down just as big in Monday trading.

As of 2:10 p.m. EDT, the shares are down 9.8%.

Big red declining arrow over a stock chart

Image source: Getty Images.

So what

Expected to have earned $0.04 per share in profits on sales of more than $90 million, Livent instead said it earned just $0.02 per share, pro forma, on sales of $68.5 million.  And that's the good news. The bad news is that Livent's actual earnings, as calculated according to generally accepted accounting principles (GAAP), were not a $0.02 per share profit, but a $0.01 per share loss.

Livent CEO Paul Graves blamed the coronavirus in part for the loss, but said the company's results "reflected a challenging operating environment" in general, both for Livent and for the lithium industry as a whole. "Lower pricing continued, and volume was down due to the impact of COVID-19 in Asian markets," he said.

Sales declined 30% from first-quarter 2019 levels, despite "all Livent facilities [being] currently online and operating."

Now what

To help bring costs in line with demand, Livent says it has suspended "all capital expansion work globally," cutting its expected 2020 capital expenditures in half such that the company now expects to spend only $115 million on capital improvements this year. 

Management gave no further specific financial guidance for the year. More broadly, though, Livent noted that automotive manufacturers do not appear to be "pulling back from their own electrification objectives" long term, although demand for lithium has been temporarily slowed along with production stoppages.

Livent predicts that other lithium producers will reduce output accordingly, which could "create a more rapid tightening of the supply demand balance once electric vehicle production starts to accelerate," which would bolster lithium prices going forward.

Although that would probably be good news for Livent, its stock price is nonetheless falling today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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