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LyondellBasell (LYB) Up 21.7% Since Last Earnings Report: Can It Continue?

·4 min read

It has been about a month since the last earnings report for LyondellBasell (LYB). Shares have added about 21.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is LyondellBasell due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

LyondellBasell's Q3 Earnings Top, Sales Lag Estimates

LyondellBasell posted profits of $114 million or 33 cents per share in third-quarter 2020, down from $965 million or $2.85 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $1.27 cents per share that topped the Zacks Consensus Estimate of $1.10.

Revenues fell 22.3% year over year to $6,776 million in the reported quarter. The figure also trailed the consensus mark of $6,909.3 million.

Consolidated EBITDA fell 69.2% year over year to $466 million.

The company witnessed improved demand for its products in the quarter on the back of higher global economic activities.

Segment Review

In the Olefins & Polyolefins — Americas division, EBITDA fell 24.4% year over year to $474 million. Polyolefin results dropped around $60 million due to lower margins.

The Olefins & Polyolefins — Europe, Asia, International segment witnessed a fall in EBITDA of 20% year over year to $148 million. Olefins results declined around $115 million due to lower margin stemming from lower ethylene prices. Combined polyolefins results were affected by lower polypropylene price spread over propylene.

The Advanced Polymer Solutions segment posted EBITDA $157 million, up from $102 million in the year-ago quarter. Compounding & Solutions results were essentially flat as higher margins were offset by lower volumes.  

EBITDA in the Intermediates and Derivatives segment fell 31.5% on a year-over-year basis to $267 million.  

The Refining segment came at a loss of $692 million in the reported quarter compared with a loss of $6 million in the year-ago quarter. Crude throughput fell 48,000 barrels per day due to lower demand for refined products.

The Technology segment’s EBITDA fell to $111 million in the reported quarter, up 33.7% year over year. The upside was driven by higher licensing revenues.

Financials

As of Sep 30, LyondellBasell had cash and liquid investments of $2.8 billion.

In the third quarter, the company paid out dividends worth $352 million. It also had 334 million common shares outstanding as of Sep 30.

Outlook

The company believes that the petrochemical industry should gain from recovery in global economies. For 2020, it expects global polyethylene demand to grow notwithstanding the pandemic and a recession. Also, China’s polyethylene trade deficit supports North American exports and tightens the U.S. domestic market. For the fourth quarter, LyondellBasell expects continued strength in North American integrated polyethylene margins.

The company also believes that a slow recovery in global mobility will exert pressure on demand for gasoline and jet fuel that will extend headwinds for its Refining and Oxyfuels & Related Products businesses. The company’s order books reflect higher demand from automotive manufacturing and other durable goods markets. This is likely to boost performance in the Advanced Polymer Solutions segment.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -12.28% due to these changes.

VGM Scores

Currently, LyondellBasell has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise LyondellBasell has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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