Lithium giant Albemarle (ALB 1.71%) released strong third-quarter results after the market close on Wednesday. In Wall Street lingo, it was a "mixed report," as earnings exceeded the analyst consensus estimate, though revenue missed it.
Shares gained 3% on Thursday, which is probably at least partly a reflection of investors' reaction to the report along with the information management shared on Thursday morning's analyst earnings call.
Here's how the quarter worked out for the specialty chemicals company and its investors.
Albemarle's key numbers
| Metric | Q3 2021 | Q3 2022 | Change YOY |
|---|---|---|---|
| Revenue | $830.6 million | $2.09 billion | 152% |
| Net income | ($392.8 million) | $897.2 million | Result flipped to positive from negative. |
| Adjusted net income | $123.3 million | $883.5 million | 617% |
| Earnings per share (EPS) | ($3.36) | $7.61 | Result flipped to positive from negative. |
| Adjusted EPS | $1.05 | $7.50 | 614% |
Data source: Albemarle. YOY = year over year.
Growth in the company's top and bottom lines was primarily driven by surging demand and soaring prices for lithium, which is needed to make the lithium-ion batteries that power electric vehicles (EVs).
Wall Street was looking for adjusted EPS of $6.99 on revenue of $2.25 billion. So the company beat the profit expectation but missed the top-line estimate.
For the first nine months of the year, Albemarle generated cash of $955.6 million running its operations, compared to $490.6 million in the year-ago period. It ended the quarter with about $1.4 billion of cash and cash equivalents and $3.4 billion in total debt.
Segment performance
| Segment | Q3 2022 Revenue | Change YOY | Q3 2022 Adjusted EBITDA | Change YOY |
|---|---|---|---|---|
| Lithium | $1.50 billion | 318% | $1.11 billion | 786% |
| Bromine | $354.9 million | 28% | $107.0 million | 24% |
| Catalysts | $235.8 million | 22% | $4.6 million | (86%) |
| Corporate | -- | -- | ($32.9 million) | Loss widened from $27.0 million in the year-ago period |
| Total | $2.09 billion | 152% | $1.19 billion | 447% |
Data source: Albemarle. YOY = year over year. EBITDA = earnings before interest, taxes, depreciation, and amortization.
Lithium revenue growth of 318% stems primarily from higher lithium prices, with higher sales volumes contributing 20% to total growth.
What the CEO had to say
Here's part of CEO Kent Masters' statement in the earnings release:
We had an outstanding quarter driven by strong demand for lithium-ion batteries. As one of the world's largest producers of lithium, we are well positioned to enable the global energy transition. With our acquisition of the Qinzhou lithium conversion plant in China and mechanical completion of our Kemerton II expansion in Australia, we are on track to more than double our lithium conversion capacity compared to last year.
The acquisition of the lithium conversion plant in China occurred in the fourth quarter. The company paid $200 million for this operation.
Updated 2022 guidance
Albemarle has raised its annual outlook several times this year. The below chart shows just its initial guidance, the most recent update prior to the current, and the current update. The company's two rounds of increases in May aren't shown.
| Metric | 2021 Result | Initial 2022 Guidance (Issued Feb. 16) | Prior 2022 Guidance (Issued Aug. 3) | Current 2022 Guidance | Annual Growth Implied by New Guidance* |
|---|---|---|---|---|---|
| Revenue | $3.33 billion | $4.2 billion to $4.5 billion | $7.1 billion to $7.5 billion | $7.1 billion to $7.4 billion (midpoint slightly lowered vs. prior guidance) |
113% to 122% |
| Adjusted EBITDA | $871 million | $1.15 billion to $1.3 billion | $3.2 billion to $3.5 billion | $3.3 billion to $3.5 billion (midpoint slightly raised) |
279% to 302% |
| Adjusted EBITDA margin | 26.2% | 27% to 29% | 45% to 47% | 46% to 47% (midpoint slightly raised) |
Increase of 19.8 to 20.8 percentage points |
| Adjusted EPS | $4.04 | $5.65 to $6.65 | $19.25 to $22.25 | $19.75 to $21.75 (midpoint unchanged) |
389% to 438% |
| Cash from operations | $344 million | $400 million to $500 million | $1.4 billion to $1.7 billion | $1.45 billion to $1.65 billion (midpoint unchanged) |
322% to 380% |
Data source: Albemarle. Calculations by author.
In short, Albemarle turned in another powerful quarter. Moreover, management's outlook for its lithium business remains bright. For the full year, it expects average annual realized lithium pricing growth of 225% to 250% and volume growth of 20% to 30%.
For most investors, Albemarle stock remains one of the two best large lithium stocks, with Livent being the other.
