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Albemarle Stock Rose 6.4% on Better-than-Expected Q2 Earnings

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Albemarle’s adjusted EPS beat estimates

Albemarle announced its second-quarter earnings on August 7 after the markets closed. It reported adjusted EPS (or earnings per share) of $1.36 as compared to $1.13 in the corresponding quarter of the previous year. The reported adjusted EPS represents an increase of 20.7% on a year-over-year basis. The adjusted EPS excludes non-recurring and other unusual items amounting to $1.36 per share and $0.02 per share related to pensions.

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Albemarle’s adjusted EPS growth was driven by higher sales, higher pricing, favorable foreign currency, lower selling, general, and administrative expenses (or SG&A) as a percentage of sales, and share buybacks. During the quarter, ALB reported SG&A expenses of $123.6 million, representing 14.5% of the revenue, while in Q2 2017, it was 15.8% of sales, implying a gain of 130 basis points on a year-over-year basis. On the other hand, the cost of goods sold (or COGS) rose as a percentage of sales. In Q2 2018, ALB’s COGS stood at 63.5% of sales, while it was 63.1% in Q2 2017, implying an increase of 140 basis points on a year-over-year basis.

In Q2 2018, Albemarle initiated a $250 million share repurchase program and bought back ~2.4 million shares. At the end of the second quarter, ALB’s common outstanding shares stood at 110.65 million shares as compared to 112.1 million shares in Q2 2017.

Guidance

Albemarle revised its adjusted EPS for fiscal 2018. ALB now expects its fiscal 2018 adjusted EPS in the range of $5.30–$5.50 versus the earlier guidance of $5.10–$5.40.

Stock price reaction

Wall Street responded positively to ALB’s earnings. The stock zoomed up 6.4% the next day. Peers W.R. Grace (GRA), FMC (FMC), and Sociedad Química y Minera de Chile (SQM) rose 0.1%, 2.4%, and 1.8%, respectively.

Investors can indirectly hold Albemarle by investing in the Lithium ETF (LIT), which invests 5.8% of its portfolio in Albemarle as of August 8.

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