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Albemarle’s 4Q17 Adjusted Earnings Beat Estimate, Stock Rose

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Albemarle’s 4Q17 earnings

Albemarle (ALB) announced its 4Q17 earnings on February 27, 2018, after market hours. It reported adjusted EPS (earnings per share) from continuing operations of $1.34, an increase of 71.8% on a YoY (year-over-year) basis. It beat analysts’ estimate of $1.21. Adjusted EPS excludes the one-time tax expense of $3.18 due to the new US tax reforms.

ALB’s adjusted EPS growth on a YoY basis was primarily driven by higher revenue growth across all reporting segments. At the same time, ALB’s better control of its operating expenses boosted growth. Its cost of goods sold during 4Q17 as a percentage of sales was reported at 64.2% of revenue, compared to 65.4% in 4Q16. That was a gain of 120 basis points on a YoY basis. ALB’s SG&A (selling, general, and administrative) expenses also improved as a percentage of sales. They were 12.7% of sales in 4Q17 compared to 18% in 4Q16, representing a gain of 530 basis points on a YoY basis.

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Stock price reactions

ALB closed at $111.57 and gained 1.3% on February 27, 2018, but the results were announced after market hours. ALB was trading at $114 after the market closed. On February 27, 2018, ALB’s peers Sociedad Química y Minera de Chile (SQM) and FMC (FMC) fell 2.2% and 1.3%, respectively. W.R. Grace (GRA) rose 0.15%.

Outlook and guidance

The strong demand for lithium is expected to continue and drive Albemarle’s growth. As a result, ALB expects its fiscal 2018 adjusted EPS to be $5–$5.40, a growth of 9%–17% on a YoY basis.

Investors looking for indirect exposure to ALB can invest in the Global X Lithium ETF (LIT), which has invested 5.8% of its portfolio in Albemarle as of February 27, 2018.

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