Lithium Giant Runs Wild, But 2 Patterns Bear Watching

On Wednesday evening, lithium-producing giant Albemarle (ALB) released its first-quarter financial results. For the period ended March 31, Albemarle posted adjusted EPS of $2.95 (GAAP EPS: $2.34) on revenue of $1.429 billion. These top and bottom-line results both beat Wall Street's consensus view while that sales print was good enough for year-over-year growth of 32.4%.

Energy Storage net sales for the quarter were $891.2 million, an increase of 70%, due to both higher pricing (+51%) and volumes (+14%). Adjusted EBITDA of $551 million grew a whopping 196%, primarily due to higher lithium pricing, spodumene inventory timing, and productivity improvements.

CEO and Chair Kent Masters commented in the press release:

"Albemarle had a strong start to 2026, with net sales and adjusted EBITDA up year over year. Higher pricing and volumes in Energy Storage and Specialties, along with continued cost and productivity actions, were the key contributors to our results. We also took advantage of our successful cash and portfolio management actions to pay down debt in the quarter, further strengthening our balance sheet and financial flexibility."

Operations

For the quarter, as Albemarle generated revenue growth of 32.4%, the cost of those goods sold increased 0.8% to $920.582 million. This left a gross profit of $500.966 million (+220.5%) on a gross margin of 35.1%, all the way up from 14.5%. The company generated a GAAP operating income of $233.506 million (+1,081%) on a GAAP operating margin of 16.3% up sharply from 1.8%.

Once accounting for interest, other income & expenses and taxes, GAAP net income printed at $277.403 million (up from -$40,000). This works out to $2.34 per fully diluted share compared to $0.00 for the year-ago period. Once adjusting for primarily "non-recurring and unusual" items, the fully diluted EPS moves up to $2.95. This compares very well to last year's -$0.18.

Guidance

Albemarle provided some full-year guidance under three different lithium pricing scenarios. At the 2025 average lithium price of about $10/kg LCE, it sees net sales of $4.1 billion–$4.3 billion and adjusted EBITDA of $0.9 billion–$1 billion.

At the Q1 2026 average price of roughly $20/kg LCE, they see net sales of $5.7 billion–$6 billion and adjusted EBITDA of $2.4 billion–$2.6 billion.

At the 2021–2025 average price of close to $30/kg LCE), Albemarle is projecting net sales of $7.5 billion–$7.8 billion and adjusted EBITDA of $4.2 billion–$4.4 billion. Wall Street was looking for about $5.7 billion, so this revenue guidance was seen as strong.

Fundamentals

During the period reported, Albemarle generated operating cash flow of $346.244 million. Out of this number came capex spending of $98.676 million, leaving free cash flow of $247.568 million. From this number, it paid out $47.667 million in cash dividends to shareholders.

Turning to the balance sheet, Albemarle ended the period with a cash position of $1.09 billion and inventories of $1.347 billion. This put current assets at $3.259 billion. Current liabilities add up to $1.576 billion, including short-term debt of $74.628 million. This leaves current and quick ratios at a somewhat robust 2.07 and 1.21, respectively.

Total assets amount to $15.14 billion. That does include "goodwill" and acquisition-related intangibles of $1.696 billion. At 11% of total assets, this is not an issue.

Total liabilities less equity comes to $5.032 billion. This does include long-term debt of $1.807 billion. That's a bit much.

I'd like to see Albemarle put the bulk of that positive free cash towards debt repayment and that's exactly what they have been doing.

My Opinion

This was a great quarter. Albemarle is running a bit hot.

Profitability is up. Cash flows are decisively positive. The guidance is solid. The balance sheet is improving.

There's a lot to like here.

Unfortunately, though I like what the company is doing, with the shares up sharply on Thursday, I do not like the chart right now. I see what I think is a Rising Wedge of bearish reversal. Often these patterns touch the top and bottom trend lines three to four times ahead of the breakdown, and Thursday morning, ALB hit the upper trendline for the fourth time.

There's only been one contact made with the lower trendline. That leaves me uncertain. What I also see is the potential for Thursday morning's high to end up being the second peak in a Double Top pattern of bearish reversal. Basically, I see two technical patterns, and both project bearish turns in the wake of this bullish run.

That said, both the stock's reading for RSI and its daily MACD are postured quite bullishly.

Bottom line? I'd rather write $180 puts expiring in July for about $8.70 than lay out $210 a share for the equity.

At the time of publication, Guilfoyle had no positions in any securities mentioned.