Lithium games are hot on earnings and outlook

Lithium games are hot on earnings and outlook

Lithium games are hot on earnings and outlook

Livent (LTHM) and Albemarle (ALB) just supercharged lithium stocks. Livent exceeded expectations and massively raised its full-year forecast on Tuesday night. Industry giant Albemarle followed suit on Wednesday night.


LTHM stock soared in Wednesday’s market action, sending buy signals and giving other lithium stocks such as Albermarle a big boost. ALB stock soared Wednesday night as other lithium games continued to rally.

As prices rise for EV materials that are in short supply, PM materials (MP) is listening late Thursday. MP Materials, whose rare earth materials are used in permanent magnet motors, reported Thursday evening.

With no new capacity coming online this year, Livent said all the benefits came from pricing. “With our price expectations for the remainder of 2022 remaining similar to today’s, Livent is significantly increasing its guidance ranges for the full year,” CEO Paul Graves said on the call. to the results.

Cowen analyst David Deckelbaum upgraded LTHM stock to outperform market performance, raising its price target from 25 to 33. He cited increased growth visibility and the extent to which Livent contracts are exposed to higher market prices.

Livent offered encouraging updates on several planned and unannounced expansions that are expected to increase capacity from 2023. The company aims to quintuple production by 2030.

Livent Earnings

Estimates: Livent was expected to post EPS of 13 cents per share from 2 cents a year ago, on revenue growth of 53% to $140.15 million.

Results: Livent earnings per share jumped 950% to 21 cents. Revenue soared 56% to $143.5 million, the second straight quarter of accelerating growth.

Outlook: Livent raised its full-year guidance range for Adjusted EBITDA to $290-350 million, up 78% mid-term from the previous range of $160-200 million . Revenue is expected to be in the $755-835 million range, up 39% mid-term from the $540-600 million range offered in mid-February.

LTHM stock market

LTHM stock jumped 30% to 28.55 on Wednesday, topping its 50- and 200-day lines. Livent broke a descending trend line from its all-time high of 33.04 on November 22 and also broke above the April 5 short-term high of 28.32. Both offered aggressive entries into LTHM’s stock.

Lithium stocks also received a big boost from the Federal Reserve, as Fed Chief Jerome Powell signaled that policymakers weren’t actively considering 75 basis points for June and July meetings.

Albemarle Earnings

Estimates: Analysts had expected Albemarle’s earnings per share to rise 49% to $1.64. Revenue rose 22.5% to $1.02 billion.

Results: Albemarle’s earnings jumped 116% to $2.38 per share. Revenue increased 36% to $1.13 billion. Both were easily the best earners in years.

Outlook: The lithium stock giant raised its outlook for 2022 “based on expectations of continued demand growth and tightening in the markets it serves.” In other words, higher prices for lithium and bromine.

It raised its 2022 EPS target to $9.25-$12.25 from $5.65-$6.65 previously, well above consensus. It forecast sales of $5.2 billion – $5.6 billion, well above forecasts of around $4.41 billion.

Albemarle Stock

ALB stock jumped 17% overnight. That’s after climbing 9.3% on Wednesday to 215.47, reclaiming the 50-day line, on Livent’s bullish outlook. ALB stock is likely to break above the 200-day line, break a trendline and clear key resistance around 248, providing several early entries.

MP Materials, after hitting a record high in late March, has lost a third of its value over the past month. On Wednesday, MP stock rose 2.7% to sit just above its 200-day line.

Why lithium stocks have struggled

The bullish start to first quarter earnings is a welcome change. ALB, LTHM and most other lithium stocks have fallen this year. Sociedad Quimica y Minera de Chile (SQM) is a notable exception, although this is partly due to its fertilizer business.

Albemarle’s disappointing earnings forecast released on Feb. 16 triggered the biggest drop in lithium stocks. Investors seemed impatient in the face of rising costs, production constraints and contracts locked in at much lower prices.

Albemarle said at the time that only 10% of its supply is sold at Chinese spot market prices which have risen around 500% over the past year. The price of 40% of its supply is fixed, based on contracts entered into before the lithium price spike in 2021, Albemarle said.

A moment of EV panic looms over lithium and rare earths

Lithium contract price

Better news on the contract front wouldn’t come as a surprise. If EV producers aren’t freaking out over supplies of lithium and other key EV materials, they probably should be.

For example, Morgan Stanley’s Adam Jonas wrote in a March 21 memo that he expects a shortage of battery materials to limit Ford’s electric vehicle production to 500,000 vehicles in 2026, a quarter official corporate purpose. GM says it will have the capacity to build 2 million electric vehicles by 2025, half in North America and the other half in China. But Jonas considers 300,000 to be realistic, not including his best-selling mini-car in China.

Both automakers told analysts last week they had locked in supplies of the lithium they needed until the middle of the decade. However, they likely rely on new, unproven sources of lithium, such as the Salton Sea in California. Industry analysts are more circumspect about the prospects of quickly overcoming technical challenges.

“Most automakers’ electric vehicle plans were developed without addressing the fundamental challenges of securing long-term supply,” Graves told analysts.

“As a result, there has been a real rush to source batteries, and in parallel, a growing awareness that there is a fundamental shortage of lithium available on the market for at least the next two years.”

Lithium supply agreements have mostly been handled by partner companies of automakers. But that is changing, he says. Automakers are “getting much more involved in battery material sourcing conversations, and they’re looking to sign engagements directly with battery material suppliers that will become much more important in the market by 2024 or so.” 2025″.

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