Albermarle Posts Exceptional Quarter

Albemarle

posted an exceptional Q3, beating by $0.18, expanding EBIT margins 260 bps to 21.6% and, most importantly, dispelling fears over spiking rare earth prices. With availability not an issue (catalysts are just 2% of rare earths demand) and Albemarle utilizing substitute technologies and cost pass-throughs, we do not expect rare earths to have a material impact in Q4 or '11. With high-20s Catalysts margins sustainable, the tightest bromine market in decades likely driving a 10%- plus price increase in '11 and valuation an attractive 13.5x'11E EPS. Albemarle reported Q2 EPS of $1.02, up 80%, and $0.18 above consensus. Upside was driven by Polymer Solutions (PS) and Catalysts which more than offset softer than expected results in Fine Chemistry. Catalysts sales rose 14% on strong polyolefins demand and improved refinery catalysts demand. Deutsche Bank has a Buy rating with a PT of $60 on ALB. ALB closed Friday at $49.02