What happened
Shares of lithium mining company Livent (LTHM +0.00%) tumbled 8% through 10:45 a.m. ET on Wednesday after it reported a mixed quarter in which earnings edged out consensus estimates but sales fell well short of expectations.
Heading into Q3 earnings, analysts had forecast Livent would earn $0.40 per share on sales of just under $252 million. In fact, Livent earned $0.41 per share, but its sales missed targets by more than $20 million, coming in at just $231.6 million.
NYSE: LTHM
Key Data Points
So what
What's more, Livent reported a profit of only $0.37 per share when calculated according to generally accepted accounting principles (GAAP) -- which is below the pro forma $0.41 per share that analysts will focus on.
Now, a lot of that sounds bad. But consider that despite "missing sales," Livent still grew its sales number 124% year over year. And consider, too, that while $0.37 isn't quite as good as $0.41, it was a lot better than Livent's performance a year ago, in which GAAP profits were negative. (Negative $0.08 per share, to be precise).
Indeed, by this time last year, Livent had netted a $0.05-per-share loss. Nine months into fiscal 2022, however, Livent is sitting on a $0.96-per-share net profit.
Now what
And business continues to look good for Livent. Management described both customer demand for lithium and "market conditions" (i.e., pricing) as strong "throughout" Q3, and the company is continuing to expand production capacity to meet demand. By the end of next year, management expects Livent to be able to "nearly double" its production of lithium.
As for this year, management has narrowed (not lowered) its guidance ranges, and it is telling investors to expect revenue to roughly double to a range of from $815 million to $845 million, with "adjusted EBITDA" (a rough proxy for GAAP profits) expected to more than quintuple. While Livent stock looks kind of pricey at a trailing P/E ratio of 56.5 right now, if management can hit its targets and earn what it's expected to next year, the stock is actually selling for a pretty attractive valuation of just 11.2 times next year's earnings.
Today's disappointing stock price movement notwithstanding, don't count Livent stock out just yet.
