Factors Giving Shape to LyondellBasell's (LYB) Q3 Earnings
LyondellBasell Industries LYB is set to release third-quarter 2018 results on Oct 30, before the opening bell.
In the last reported quarter, the company’s net profit rose around 46% year over year to $1,654 million or $4.22 per share.
Adjusted earnings of $3.34 per share surpassed the Zacks Consensus Estimate of $2.90.
Revenues increased roughly 22% year over year to $10,206 million, beating the Zacks Consensus Estimate of $9,111.1 million.
Notably, LyondellBasell surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive earnings surprise being 8.4%.
The company’s shares have lost 9.9% in the past year compared with the industry’s 20.3% decline.
Can the company surprise investors again or is it heading for a pullback? Let’s see how things are shaping up for this announcement.
Factors at Play
LyondellBasell, during its second-quarter earnings call, stated that it is well-positioned to boost earnings in the quarters ahead on operational and market improvements in Refining, strong performance in Intermediates and Derivatives, the A. Schulman buyout and the start-up of Hyperzone HDPE (high-density polyethylene) plant in 2019. Earnings are expected to benefit from higher profits at its refinery which are likely to be driven by the new marine fuel regulations in second-half 2019.
LyondellBasell is executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company’s expansion initiatives are expected to boost capacity and drive earnings.
The company is constructing a HDPE plant on the U.S. Gulf Coast that will employ its proprietary Hyperzone PE technology. The facility is expected to have an annual capacity of 1.1 billion pounds.
Moreover, LyondellBasell completed the acquisition of A. Schulman, Inc. in August 2018. The buyout doubles the size of LyondellBasell's existing compounding business. It is also expected to prove accretive to earnings within the first full year following closure. The company also expects $150 million of cost synergies within two years.
However, planned maintenance on one of the two crackers at the Channelview facility negatively impacted LyondellBasell’s second-quarter results by roughly $50 million. The company expects a negative impact of roughly $55 million from downtime associated with planned maintenance at one of its German crackers over the third and fourth quarter of 2018.
Moreover, maintenance at one of LyondellBasell’s three propylene oxide plants in Texas is expected to reduce EBITDA by roughly $20 million in the third quarter. Planned maintenance at its refinery is also expected to impact EBITDA by around $20 million in the third quarter.
The Zacks Consensus Estimate for total third-quarter revenues is pegged at $9,564 million, reflecting year-over-year growth of 12.3%.
Revenues for LyondellBasell’s Intermediates and Derivatives segment is projected to rise 11.1% from the prior-year quarter’s tally as the Zacks Consensus Estimate is pegged at $2,308 million.
At the Olefins & Polyolefins – Americas segment, revenues are expected to rise 10.4% from the year-ago quarter as the Zacks Consensus Estimate is currently pegged at $2,705 million. Meanwhile, revenues from the Olefins & Polyolefins – Europe, Asia, International division are likely to increase 0.6% year over year as the Zacks Consensus Estimate stands at $3,173 million.
The Zacks Consensus Estimate for revenues at the Refining & Oxyfuels segment is pegged at $2,041 million, reflecting a 22.2% increase on a year-over-year basis.
The Technology segment sales are expected to rise 12.2% year over year in the to-be-reported quarter as the Zacks Consensus Estimate is pinned at $110 million.
LyondellBasell Industries N.V. Price and EPS Surprise
LyondellBasell Industries N.V. Price and EPS Surprise | LyondellBasell Industries N.V. Quote
Our proven model does not show a beat for LyondellBasell this earnings season. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Earnings ESP: Earnings ESP for LyondellBasell is -0.59%. This is because the Most Accurate Estimate is $2.72 while the Zacks Consensus Estimate is currently pegged at $2.73. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: LyondellBasell currently carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks Poised to Beat Estimates
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
CF Industries Holdings, Inc. CF has an Earnings ESP of +8.33% and a Zacks Rank #1.
Domtar Corporation UFS has an Earnings ESP of +7.90% and a Zacks Rank #2.
Nutrien Ltd. NTR has an Earnings ESP of +10.43% and a Zacks Rank #2.
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