Livent (LTHM) stock declined 5.9% in Tuesday's after-hours trading session following the lithium producer's release of its third-quarter report.
The stock's drop is likely due in large part to the quarter's revenue falling short of the Wall Street consensus estimate. That said, top-line growth was still powerful, driven by surging demand and soaring prices for lithium, which is needed to produce lithium-ion batteries for electric vehicles (EVs). Earnings growth, which was stellar, was a little better than analysts had expected.
Management narrowed its full-year revenue guidance, but the midpoint was unchanged. It also narrowed and slightly increased its 2022 outlook for the key profitability metric that it provides, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
It's possible that some investors were disappointed that there wasn't a bigger positive adjustment to guidance, as in prior quarters this year.
Livent's key numbers
| Metric | Q3 2021 | Q3 2022 | Change |
|---|---|---|---|
| Revenue | $103.6 million | $231.6 million | 124% |
| GAAP net income | ($12.6 million) | $77.6 million | Result flipped to positive from negative. |
| Adjusted net income | $6.7 million | $85.1 million | 1,170% |
| GAAP earnings per share (EPS) | ($0.08) | $0.37 | Result flipped to positive from negative. |
| Adjusted EPS | $0.04 | $0.41 | 925% |
Data source: Livent. GAAP = generally accepted accounting principles.
Revenue growth was driven by both higher realized lithium prices and increased sales volumes.
Sequentially, revenue and adjusted EPS were up 6% and 11%, respectively, from the second quarter.
Wall Street was looking for adjusted EPS of $0.40 on revenue of $251.9 million, so the company edged by the profit expectation but missed on the top line.
For the first nine months of 2022, Livent generated cash from operations of $328.2 million, up significantly from $41 million in the year-ago period. It ended the quarter with cash of $211.6 million and long-term debt of $241.6 million.
For context, in the second quarter, Livent's revenue surged 114% year over year to $218.7 million, and its adjusted EPS increased about ninefold to $0.37.
Capacity expansion update
Lithium carbonate in Argentina (bullet points taken verbatim from my Livent Q1 earnings article):
- The first expansion is on schedule to add 10,000 metric tons of capacity by the first quarter of 2023.
- The second phase of the first expansion is expected to add 10,000 metric tons of capacity by the end of 2023, "which will nearly double Livent's total available LCEs [lithium carbonate equivalents] from 2021 levels," the company said in the earnings release.
Lithium hydroxide (last bullet point taken verbatim from my Livent Q1 earnings article):
- The 5,000-metric-ton-capacity expansion in Bessemer City, North Carolina, just began qualifying product with customers.
- The project to produce another 15,000 metric tons of capacity in China is expected to be mechanically complete by the end of 2023.
- Following these expansions, Livent expects to have total lithium hydroxide capacity (excluding Nemaska, discussed below) of at least 55,000 metric tons by the end of 2025, compared with its current capacity of 25,000 metric tons.
Lithium hydroxide at its 50%-owned Nemaska project:
- Nemaska is a hard-rock lithium project in Québec, Canada. An entity owned by the Québec government owns the other 50% stake.
- Project construction is scheduled to begin in early 2023, with meaningful production expected in 2026.
- Nemaska is "expected to have 34,000 metric tons of nameplate capacity of battery-grade lithium hydroxide and over 30 years of mine-life," Livent said in the release.
2022 guidance for profitability metric EBITDA raised slightly
| Metric | 2021 Result | Prior 2022 Guidance | Updated 2022 Guidance | Updated Projected Change at Midpoint |
|---|---|---|---|---|
| Revenue | $420.4 million | $800 million to $860 million ($830 million midpoint) | $815 million to $845 million ($830 million midpoint) | 97% |
| Adjusted EBITDA | $69.5 million | $325 million to $375 million ($350 million midpoint) | $350 million to $370 million ($360 million midpoint) | 418% |
Data source: Livent.
Another great quarter
In short, Livent turned in another great quarter. It was an added plus that it slightly brightened its full-year profitability guidance, since it has already significantly raised its outlook for both revenue and adjusted EBITDA several times this year.
The stock's modest sell-off in Tuesday's after-hours trading session was probably mostly driven by short-term traders taking some profits. After all, in 2022, Livent shares have gained 28.5% through Tuesday's regular trading session, while the S&P 500's return is underwater by 18% over this period.
The EV revolution is still in its early innings, which should continue to propel select lithium stocks higher over the long term.
