ALB - Embedded Expectations Analysis - 2018 05 25
Albermarle Corporation (ALB:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 25.3x Uniform P/E. Although negative management sentiment suggests near-term upside may be limited, at these levels, market expectations remain far too bearish given the firm's strong macro tailwinds and favorable positioning. As such, longer-term outperformance is likely warrantedSpecifically, management may lack confidence in their claim that their clients need to lock up commitments for their critical raw materials to meet their long term targets, and may have concerns about the sustainability of favorable market trends in flame retardants for their Bromine Specialties business. Additionally, they may be exaggerating the positive impact of marine fuel regulation on their HPC business in clean fuels, and may have concerns about the sustainability of strong performance in their Bromine and Catalysts businesses, driven by concerns about their ability to invest successfully in those segments. That said, market expectations are for Uniform ROA to remain flat despite strong macro tailwinds and favorable positioning, and as a result longer-term equity upside is likely warranted at current valuations
Albemarle is a global developer, manufacturer and marketer of chemicals across a range of end markets including energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals, crop protection and custom chemistry services. The company's segments include: Lithium, which develops and manufactures a range of basic lithium compounds and lithium specialties and reagents; Bromine Specialties, which includes products used in fire safety solutions and other chemicals applications; and Catalysts, which includes Clean Fuels Technologies, fluidized catalytic cracking catalysts and additives, and performance catalyst solutions.
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