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With lithium stocks slumping amid a dive in lithium prices, Livent (LTHM) earnings delivered a huge upside surprise after the close Tuesday. LTHM stock rallied, but the news may not be as positive for Albemarle (ALB), which reports after today’s close.
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After a 70% plunge in spot lithium carbonate prices since mid-November, Mizuho analyst Christopher Parkinson wrote in a Tuesday note that Albemarle is highly likely to lower 2023 guidance.
Livent Earnings
Estimates: Analysts expected Livent to report a Q1 profit of 39 cents a share, up 86% from a year ago. Revenue was seen growing 63% to $233.5 million.
Results: Livent EPS surged 186% to 60 cents. Revenue grew 77% to $253.5 million.
Outlook: Livent bumped up 2023 revenue guidance to a range of $1.025 billion-$1.125 billion, raising the floor and ceiling by $25 million. Ahead of Q2 results, analysts were projecting $1.07 billion in full-year sales. The firm raised its outlook for adjusted EBITDA by $20 million to a range of $530 million-$600 million.
Livent’s guidance reflects a planned 20% increase is sales volumes. Capacity expansions are on track, providing an additional 4,000 metric tons of volume in 2023 and 10,000 more in 2024.
Albemarle On The Spot
Over the past 18 months, major lithium players restructured fixed-price contracts to take advantage of surging spot prices for the key EV battery material. Rising spot prices fueled big gains in sales and profits for lithium stocks like ALB, LTHM and SQM.
But with lithium stocks now much more exposed to spot-price movements, the downside of that strategy has arrived. The impact of lower spot prices is likely to be felt more by Albemarle, which has largely completed a transition to contracts that more closely reflect market prices. Albemarle’s 2023 guidance assumed flat lithium prices vs. fourth-quarter levels.
Still, Mizuho’s Parkinson expects a lagged impact of lower pricing, affecting contract prices in the second half of the year. He lowered his price target for ALB stock to 224 from 238, while keeping a neutral rating.
For Livent, the near-term impact of lower spot lithium prices may be more moderate. In February, Livent said that 70% of contracts in 2023 would still be fixed price.
Lithium Price Outlook
In an April 20 note, Deutsche Bank analyst Corinne Blanchard said she now expects a modest lithium surplus in 2023 amid a 40% boost to expectations for Chinese output. However, Blanchard sees a bottom forming in Q2 and recovery in the second half of the year. In the medium to long term, she still sees a significant lithium supply shortage.
Blanchard cut her price targets for buy-rated lithium stocks SQM (to 90 from 95), ALB (to 240 from 325) and Lithium Americas (to 30 from 36).
Those price-target cuts came before Chilean President Gabriel Boric announced plans to partially nationalize the industry. The impact of Chile’s new plan, which needs approval from the legislature under opposition control, is far from clear. Boric said the leases with Albemarle, up in 2043, and with SQM, up in 2030, will be honored. But the companies may need to restructure the leases in advance to get related regulatory approvals.
Despite softer lithium prices at the moment, Albemarle isn’t slowing down. On Tuesday, the company said it will double production of lithium hydroxide at its Kemerton plant in Western Australia. When completed in 2026, capacity should reach 100,000 metric tons per year, enough to supply 2.4 million electric vehicles.
Albemarle will feed the new Kemerton capacity from its Greenbushes mine in Australia.
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Albemarle Earnings
Estimates: Analysts expect Albemarle’s Q1 earnings per share to surge 194% to $7. Revenue is seen growing 142% to $2.73 billion.
Results: Check back late Wednesday.
Outlook: In February, Albemarle reiterated 2023 sales guidance of $11.3 billion to $12.9 billion, equating to growth of 55%-75%. That includes 30%-40% growth in lithium volumes. Ahead of Q2 results, analysts were predicting $11 billion in sales.
Lithium Stocks: LTHM, ALB
LTHM stock jumped 9.7% to 23.06 in early Wednesday stock market action, following a 0.5% rise in Tuesday’s regular session. ALB stock lost 2.2% on Tuesday, but bounced 2.2% after Livent’s results and news of its expansion in Australia.
If the move holds for LTHM stock on Wednesday, it could break through its 50-day line but would still have further to go to regain its 200-day line.
Neither stock has shown much fight lately. LTHM stock closed on Tuesday 42% below its all-time high last September. ALB stock has fallen 48% from its November peak and is testing its lowest levels since July 2021.
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