Sociedad Quimica y Minera de Chile (SQM 2.19%), or SQM, stock fell 10% on Thursday, following the lithium giant's release of second-quarter 2022 results on the prior evening. (Shares are down 3.9% on Friday as of 1:51 p.m. ET, though this decline is probably largely attributable to market dynamics, as major indexes are solidly in the red.)

While the overall report was very strong, earnings fell short of the Wall Street consensus estimate. Had SQM stock's performance been less spectacular this year, it probably wouldn't have suffered as steep a loss following the earnings release. Going into the report on Wednesday evening, shares had more than doubled in 2022, so investors had mighty high expectations.

Despite the post-earnings release pullback, SQM stock has returned 92% so far in 2022 through Thursday.  

A light blue electric vehicle charging at a public charging station.

Image source: Getty Images.

SQM's key numbers

Metric Q2 2022 Q2 2021 Change
Revenue $2.6 billion $588.0 million 342%
Net Income $859.3 million $89.8 million 857%
Earnings per share (EPS) $3.01 $0.31 871%

Data source: SQM.

Wall Street was looking for earnings of $3.12 per share on revenue of $2.28 billion. So the company missed the profit expectation, but sped by the top-line estimate.

The quarter's gross profit was $1.3 billion, up 598% from the year-ago period. Gross margin (gross profit divided by revenue) was 49.9%, up from 31.6% in the year-ago quarter, but lower than the prior quarter's 57.7%.

SQM ended the quarter with $1.95 billion in cash and cash equivalents and $2.17 billion in long-term debt.

For context, in the first quarter, revenue soared 282% year over year to $2.02 billion. Growth was driven by the lithium and derivatives segment's revenue skyrocketing 970% to $1.45 billion.

SQM's revenue by business

Segment Q2 2022 Revenue Change YOY Change QOQ
Lithium and derivatives $1.85 billion 1,033% 28%
Specialty plant nutrition (SPN) $330 million 52% 20%
Iodine and derivatives $174 million 41% 14%
Potassium chloride and potassium sulfate $182 million 209% 60%
Industrial chemicals $59 million 243% 118%
Other $6 million (19%) 35%
Total $2.60 billion 342% 29%

Data source: SQM. YOY = year over year. QOQ = quarter over quarter.

The lithium segment continues to greatly benefit from the robust demand for the metal to produce lithium-ion batteries for electric vehicles. Global lithium supply has been tight relative to demand over the last year, which has lit a fire under lithium prices. 

In the second quarter, lithium sales volume rose 41% year over year to 34.2 metric tons (MT) of lithium carbonate equivalent (LCE). SQM realized an average price of about $54,000 per MT, an increase of 701% year over year.

The company's specialty plant nutrition and potassium segments (its two largest businesses after lithium) continue to perform particularly well due to continued tightness in the fertilizer market. Fertilizer prices have spiked higher because of inflationary pressures and pandemic-driven supply chain issues that intensified following Russia's invasion of Ukraine. 

Management's 2022 lithium outlook is now even rosier 

In short, SQM turned in another great quarter. Moreover, management's view of the lithium market is even rosier than it was about three months ago when the first quarter's results were released.

Management now expects global demand for lithium to grow about 35% in volume in 2022, driven by continued strong EV sales. This is an increase from the prior estimate of 30%. In addition, the company now projects that its lithium sales volume for the year will surpass 145,000 MT of LCE, an increase of 5,000 MT from the prior estimate. For context, in 2021, SQM's lithium sales volume was 101,100 MT of LCE.