Albemarle Scales New 52-Week High: What's Driving It?

Shares of chemicals maker, Albemarle Corporation (NYSE:ALB) touched a fresh 52-week high of $124.32 yesterday, before retracing to close the day at $123.85.

Albemarle has a market cap of roughly $13.7 billion and average volume of shares traded in the last three months is around 1,374.6K. The company has an expected long-term earnings per share growth of 12.3%.

Albemarle has outperformed the industry it belongs to over a year, partly reflecting its forecast-topping earnings performance and its strategic growth initiatives. The company’s shares have rallied around 62.8% over this period, compared with roughly 24.1% gain recorded by the industry.

Driving Factors

Upbeat prospects for the lithium business are driving Albemarle. The company remains committed to strengthen its lithium business and is well placed to leverage strong expected growth in the battery-grade lithium market.

China is considering an eventual ban on production and sales of cars that run on diesel or gasoline, per a report from the country’s official news agency Xinhua, released on Sep 10. The move is part of Beijing’s efforts to reduce carbon emissions and pollution and is also aimed at promoting the development of electric and hybrid vehicles. The news appears to have provided a boost to Albemarle’s shares yesterday.

Albemarle is seeing significant momentum in its lithium business. Sales from its Lithium and Advanced Materials unit jumped 36% year over year to $317.9 million in the last reported quarter, supported by favorable pricing and higher sales volume.

The buyout of the lithium assets of Jiangxi Jiangli New Materials Science and Technology Co. Ltd. has allowed Albemarle to supply premium lithium salts to an expanded global customer base and accelerated the company’s ability to meet its goal of capturing 50% of the growth in the lithium industry.

The company’s Talison joint venture in Australia is also expanding lithium concentrate production at its Greenbushes mine. The expansion will double the lithium carbonate equivalent capacity at Greenbushes from 80,000 metric tons per year to more than 160,000 metric tons.

Albemarle, in early 2017, also agreed to amend its lithium production rights agreement with the Chilean Economic Development Agency to extend the term of the deal and increase the company's authorized lithium quota at its facility in the Salar de Atacama, Chile. The amended agreement offers Albemarle with adequate lithium to make more than 80,000 metric tons of technical and battery grade lithium salts annually over the next 27 years at the company’s expanding battery grade manufacturing plants in La Negra, Antofagasta (LON:ANTO).

Albemarle is also selling non-core businesses and assets to boost growth opportunities and focus on its key businesses. As part of this move, the company, last year, sold its Chemetall Surface Treatment unit to German chemical giant BASF (OTC:BASFY) for around $3.2 billion. These divestments led to significant cash generation for Albemarle, allowing it to cut debt and strengthen its balance sheet.

Albemarle currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Stocks in the basic materials space worth considering include Kronos Worldwide Inc (NYSE:KRO) and Kraton Corporation (NYSE:KRA) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kronos Worldwide has expected long-term earnings growth rate of 5%.

Kraton has expected earnings growth of 7.2% for the current year.

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