Lithium is a major element required in the production of multiple items, ranging from pesticides to cell batteries and industrial agents. 

When it comes to lithium on the agriculture front, the current trade deals with the eastern countries (particularly China) has put more emphasis on the volume of domestic production of crops. The trade agreement was announced in January and it says the US will “strive” to export $5 billion worth agricultural products to China. With the increased volume on their shoulders, as farmers are heavily investing in crop protection and management.

Lithium-based batteries are a key requirement for electric vehicles, which are gaining popularity each passing day. With more and more people shifting from fuel cars to electric vehicles across North America, Europe and China, demand for lithium has widened.

Lithium-Ion Battery Separator Industry 2020 Global Market research report expects the market size of lithium-ion battery separator to grow at a CAGR of 9% between 2021 and 2026. The market is expected to be valued at $5.29 billion by 2026.

Companies such as FMC Corporation (FMC), Albemarle Corporation (ALB) and Livent Corporation (LTHM) use lithium as the raw material in their production process. With a robust growth in the market demand for goods produced by these companies driving their earnings and revenue, these stocks are attractive investments right now.

FMC Corporation (FMC)

FMC manufactures and sells crop management products to promote fodder health and pest control. It primarily sells three kinds of chemical for optimal crop protection and management – herbicides, insecticides and fungicides, as well as develops biological bionematicides. The company supplies its products across the Americas, EMEA and Asia. FMC gained more than 100% to hit its 52-week high of $113.73 in September since hitting its 52-week low of $56.77 in March.

Despite the pandemic-led disruptions, FMC’s net income grew 5% year-over-year to $185 million in the second quarter ended June 2020. The company’s EPS increased 7% from the year-ago value to $1.41, while adjusted EBITDA grew slightly to $341 million.

Earlier this year, FMC announced a collaboration agreement with Cyclica, Inc. to improve the efficiency of new crop protection chemistry. It currently has more than 25 promising new molecules in its chemical pipeline. FMC also partnered with Nutrien Ag solutions to develop FMC Arc farm intelligence platform in brassica crop production, as well as Zymergen for developing breakthrough crop protection solutions. This is expected to act as a driving factor for the company’s future performance.

The consensus EPS estimate of $1.11 for the third quarter ended September 2020 indicates an 18.1% improvement year-over-year. FMC also has an impressive earnings surprise history, as it beat the street EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.07 billion for the about to be reported quarter indicates a 5.7% increase from the same period last year.

How does FMC stack up for the POWR Rating?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

B for Industry Rank

A for Overall POWR Rating.

The stock is also ranked #8 out of 69 stocks in the Chemicals industry.

Albemarle Corporation (ALB)

ALB develops and supplies highly engineered industrial specialty chemicals in three segments – Lithium and advanced materials, Bromine specialties and Refining solutions. It also manufactures hydro-processing catalysts. ALB’s products have applications in primarily petroleum refining consumer electronics, energy, and automotive industries.

On September 2nd, ABLE was selected by the U.S. Department of Energy (DOE) as a critical partner for two lithium research projects conducted through a battery manufacturing lab call.

Though the coronavirus pandemic severely affected ALB’s business operations, the company managed to generate $764 million in net sales and $85.60 million in net income in the second quarter ended June 2020. Also, ALB increased its quarterly dividend payout by 5% year-over-year to $0.39 per share.

The market expects ALB’s EPS and revenue to rise 21.6% and 8.2%, respectively, next year. Its EPS is expected to grow at a rate of 15% per annum over the next five years.

ALB has gained more than 105% since hitting its 52-week low of $48.89 in March. The stock hit its 52-week high of $101 in September.

It’s no surprise that ALB is rated a “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade and Buy & Hold Grade, and a “B” for Peer Grade and Industry Rank. In the 69-stock Chemicals industry, it is currently ranked #11.

Livent Corporation (LTHM)  

LTHM produces and supplies battery grade lithium, butyl lithium for polymer manufacturing as well as lithium compounds for chemical synthesis. It is a subsidiary of the FMC Corporation, and has an international supply chain.

LTHM recently announced a senior notes offering, which is estimated to raise $217.80 million as net proceeds. The company aims to use these funds for refinancing its existing green projects, pay off a portion of its debt, as well as for general corporate purposes.

LTHM’s revenues in the second quarter ended June 2020 declined year-over-year to $64.90 million, due to the impact of the pandemic, as well as disruptions in its auto supply chain. Nonetheless, the company is expected to bounce back by next year, as per the favorable earnings and revenue outlook. The market expects LTHM’s EPS and revenue to grow 242.9% and 24%, respectively, next year. Moreover, its EPS is expected to grow at 6.2% per annum over the next five years.

LTHM has gained more than 215% since hitting its 52-week low of $3.95 in March. The stock hit its 52-week high of $12.53 in October. 

LTHM’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” for Trade Grade and Peer Grade, and “B” for Buy & Hold Grade and Industry Rank. It is also ranked #15 out of 33 stocks in the Industrial – Metals group. 

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FMC shares were trading at $108.53 per share on Monday afternoon, up $0.51 (+0.47%). Year-to-date, FMC has gained 10.31%, versus a 11.07% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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