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Why Lithium Americas Stock Just Spiked 10%

By Rich Smith – Nov 4, 2021 at 2:10PM

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You can thank Albemarle for the gains.

What happened

As of 12:55 p.m. EDT, shares of Lithium Americas (LAC -2.56%) were up 10% -- but not because of anything the company said.

Instead, Lithium Americas stock is sharply higher due to Albemarle (ALB -1.01%).

Arrow angles up on a green stock chart.

Image source: Getty Images.

So what

Specifically, Albemarle reported its fiscal Q3 earnings after the close of trading last night and blew away analyst estimates. Instead of the $770.4 million in revenue and the $0.77-per-share profit that Wall Street had predicted, Albemarle reported $830.6 million in revenue and an astonishing $1.05-per-share profit.  

Now, don't get too excited. Although Q3 sales surged 11% at the giant lithium miner, the profit earned on those sales -- the aforementioned $1.05 per share -- turns out to actually be only an adjusted profit. In fact, when calculated according to generally accepted accounting principles (GAAP), Albemarle ended up losing $3.36 per share for the quarter.  

Now what

As Albemarle explained in its press release, though, the only reason it lost money was because of "a $4.29 per share charge for a recent arbitration decision." That means that the underlying lithium business is still going strong.

Indeed, demand is so great for the metal that Albemarle says it's "making investments to add significant conversion capacity in China, initially targeting up to 150,000 metric tons of lithium hydroxide per year." And as further evidence of how well things are going, Albemarle upped its sales forecast for full-year 2021 to a range of $3.3 billion to $3.4 billion, with adjusted earnings between $3.85 and $4.15 per share.

Granted, Albemarle expects to burn cash this year -- free cash flow will be about negative $350 million, give or take. But on balance, the strong revenue growth that this Lithium Americas peer is enjoying and the booming (if adjusted) profits seem to have investors very excited to hear what Lithium Americas will say when it reports its own earnings 11 days from now.  

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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