Albemarle Earnings: Cost Reductions Should Help Profits Amid Lower Lithium Price Environment

Albemarle's fourth-quarter earnings confirmed our view that the company is focusing on free cash flow generation over lithium volume growth amid the decline in lithium prices. As the company cuts operating expenses, this should support profits amid lower lithium prices. As Albemarle plans to cut capital expenditures and optimize working capital, this should support higher cash flow generation in 2024. Management's market commentary also confirms our view that growing demand and slowing supply will lead to prices rising in 2024. Having updated our model to incorporate fourth-quarter results, we maintain our $300 per share fair value estimate. Our narrow moat rating is also unchanged.