Last week, lithium giant Albemarle (ALB -1.16%) released second-quarter 2022 earnings that exceeded Wall Street's consensus estimate. But the even better news for investors was that management significantly raised its full-year guidance for a handful of key metrics for the third time in just three months.

The U.S.-based specialty chemicals company's earnings growth was driven by its lithium business, though its bromine business also contributed. The lithium segment continues to benefit from the rapid growth of the electric vehicle (EV) market. Lithium is needed to produce the lithium-ion batteries that power EVs.

Albemarle stock is holding up well in this tough market. In 2022 through Aug. 5, it's eked out a return of 2.2%, while the S&P 500's return is 13% in the red. And over the last three years, shares have returned 279%, compared with the broader market's return of 45.6%.

Now let's dive into Albemarle's Q2 report.

A red EV charging at a charging station.

Image source: Getty Images.

Albemarle's key numbers

Metric Q2 2022 Q2 2021 Change
Revenue $1.48 billion $773.9 million 91%
Net income $406.8 million $424.6 million (4%) 
Earnings per share (EPS) $3.46 $3.62 (4%)
Adjusted EPS $3.45 $0.89 288%

Data source: Albemarle.

The year-ago period's reported net income and EPS include a gain related to the sale of the company's fine chemistry services (FCS) business. Adjusted EPS strips out this gain and other more minor one-time items.

Wall Street was looking for adjusted earnings of $3.26 per share on revenue of $1.5 billion. So the company beat the profit expectation and slightly missed the top-line estimate.

For the first six months of the year, Albemarle generated cash of $60.3 million running its operations. It ended the period with $930.6 million of cash and equivalents and $3.5 billion in total debt.

Segment performance

Segment Q2 2022 Revenue Change YOY Q2 2022 Adjusted EBITDA Change YOY
Lithium $891.5 million 178% $495.2 million 353%
Bromine $377.8 million 35% $135.7 million 47%
Catalysts $210.3 million 42% $9.8 million (54%)
Other -- (100%)* -- (100%)*
Corporate -- -- ($30.5 million) Loss narrowed from $37.0 million in the year-ago period 
Total $1.48 billion 91% $610.2 million 214%

Data source: Albemarle. YOY = year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization. *The FCS business was sold on June 1, 2021. In the year-ago period, its revenue and adjusted EBITDA were $25.5 million and $8.4 million, respectively. 

The lithium segment's year-over-year revenue growth stemmed from a 160% surge in pricing from renegotiated contracts and increased market pricing, and an 18% rise in volume. That volume increase came from the company's expansion in Chile and higher tolling volumes. (In tolling, one company supplies raw materials to another company, which processes them to the supplier's specifications.)

The bromine segment's results were driven by strong demand for fire safety solutions in various end markets. Its sales growth was primarily due to increased pricing, though higher volumes contributed 4% to growth. 

The catalysts segment's profitability declined because of continued cost pressures from soaring natural gas prices in Europe, due to the Russia-Ukraine war, and higher costs for raw materials. The company said that its "strategic review of the catalysts business is ongoing." Yes, that probably means that Albemarle could decide to sell this business.

Upward revised 2022 guidance

Albemarle attributed the latest upward revision to 2022 guidance to "successful lithium contract renegotiations and increased prices in the lithium and bromine businesses."

Investors should note that with this latest increase in guidance, the company now expects to be free-cash-flow positive in 2022. 

Metric 2021 Result Current 2022 Guidance 

Second Upward Revision of 2022 Guidance (Issued May 23)

Prior Upward Revision of 2022 Guidance (Issued May 4) Initial 2022 Guidance (Issued Feb. 16) Annual Growth Implied by New Guidance*
Revenue $3.33 billion $7.1 billion to $7.5 billion $5.8 billion to $6.2 billion $5.2 billion to $5.6 billion $4.2 billion to $4.5 billion 113% to 125%
Adjusted EBITDA $871 million $3.2 billion to $3.5 billion $2.2 billion to $2.5 billion $1.7 billion to $2.0 billion $1.15 billion to $1.3 billion 267% to 302%
Adjusted EBITDA margin 26.2% 45% to 47% 38% to 40% 33% to 36% 27% to 29% Increase of 18.8 to 20.8 percentage points
Adjusted EPS $4.04 $19.25 to $22.25 $12.30 to $15.00 $9.25 to $12.25 $5.65 to $6.65 376% to 451%
Cash from operations $344 million $1.4 billion to $1.7 billion  $550 million to $850 million $500 million to $800 million $400 million to $500 million 307% to 394%

Data source: Albemarle. *Calculated by author.

In short, Albemarle turned in another great quarter, and the sheer magnitude of its 2022 guidance increases is just jaw-dropping. 

Albemarle stock remains worth at least putting on your watch list.