Livent Stock Soars on Big Earnings Beat and Guidance Boost
Lithium producer Livent smashed earnings expectations and the stock was rising after the lithium company’s first-quarter report. It’s a reminder to investors that results from commodity producers don’t always track commodity prices perfectly. Livent (ticker: LTHM) on Tuesday reported earnings of 60 cents a share from $253.5 million in sales. Wall Street was looking for profit of 39 cents on sales of $230.2 million,. What’s more, the company raised its full-year financial guidance. Livent now expects earnings before interest, taxes, depreciation and amortization, or Ebitda, of between $530 million and $600 million. Prior guidance, given in February, was a range of $510 million to $580 million. Wall Street currently projects 2023 Ebitda of $530 million. Livent stock was up 9.1% in premarket trading. Coming into Wednesday trading, shares have fallen about 21% over the past three months while the S&P 500 has dropped roughly 1% over the same span. Falling spot prices for lithium products is part of the reason for the recent underperformance. Benchmark prices for lithium carbonate, a key component in lithium-ion batteries that power electric vehicles from Tesla (TSLA) and others, peaked in November at around $90,000 per metric ton. They started 2023 at about $75,000 a metric ton and are now sitting at about $25,000 a metric ton. Spot price volatility isn’t great for commodity-linked businesses, but not all lithium business is done on a spot basis. A lot is done based on annual contracts. “If you were looking for lithium producer cash flows to look like the China carbonate [spot] price chart, Livent’s 1Q report will disappoint,” wrote Evercore ISI analyst Stephen Richardson in a report. He is being tongue-in-cheek. He’s happy that Livent’s results didn’t track spot prices and that they beat Wall Street estimates. Richardson rates Livent shares Buy and has a $37 price target on the stock. That’s up roughly 60% from the $23 level shares were trading at early Wednesday. “The quick [quarterly] read is Livent was thoughtful not to link contracts to the market at peak, and is still benefitting from the roll-up of multi-year contracts closer to market reality,” added Richardson. That is “likely to confound the bears.” Based on the stock price reaction, he’s right. Lithium producer Albemarle (ALB) will be reporting earnings on Wednesday evening. Wall Street is looking for earnings per share of $7, up from $2.38 reported in the first quarter of 2022. It’s been a wild time lately for lithium prices, and lithium producer’s earnings.
AKE Price at posting:
$11.99 Sentiment: None Disclosure: Held
