Albemarle's Q2 Earnings: Shares Decline Despite Positive Free Cash Flow Guidance

Albemarle reported Q2 results in line with expectations, but profits fell due to lower lithium prices. Shares declined despite management's plans to reduce costs and achieve positive free cash flow in 2025. Morningstar maintains a $200 fair value estimate and views the stock as undervalued, trading at less than 35% of its fair value. The company is expected to benefit from growing demand and a supply surplus reduction over the next couple of years.

Albemarle Corporation (NYSE: ALB) reported its second-quarter 2025 results, which were largely in line with expectations despite a decline in profits due to lower lithium prices. The company's net sales for the quarter stood at $1.3 billion, a 7% decrease from the prior-year quarter of $1.4 billion, primarily driven by lower pricing in the Energy Storage segment [1].

Adjusted EBITDA, a key measure of operating performance, declined by $50 million to $336 million, as lower input costs and ongoing cost reduction efforts mostly offset lower lithium pricing. Net income attributable to Albemarle increased year-over-year by $211 million to $23 million, due primarily to a prior-year period after-tax charge of $215 million related to capital project asset write-offs and associated contract cancellation costs.

Kent Masters, Chairman and CEO of Albemarle, stated, "We delivered strong second quarter results and are maintaining our previous outlook considerations assuming current lithium market pricing persists." The company expects to achieve positive free cash flow for the full year 2025, assuming current lithium market pricing persists for the remainder of the year [1].

The Energy Storage segment, a key driver of Albemarle's revenue, saw a 14% decrease in net sales to $718 million, primarily due to lower pricing. However, volumes were up 15% thanks to record production from the integrated conversion network, partially offset by reduced tolling volumes. The Specialties segment, on the other hand, saw a 5% increase in net sales to $352 million, primarily due to higher volumes [1].

Despite the decline in profits, Albemarle's shares declined slightly. Morningstar maintains a $200 fair value estimate and views the stock as undervalued, trading at less than 35% of its fair value. The company is expected to benefit from growing demand and a supply surplus reduction over the next couple of years.

References:
[1] Albemarle Corporation. (2025, July 30). Albemarle Reports Second-Quarter 2025 Results. Retrieved from https://www.prnewswire.com/news-releases/albemarle-reports-second-quarter-2025-results-302517789.html