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LyondellBasell Industries N.V.’s LYB stock looks promising at the moment. The company benefits from higher demand for its products on a recovery in global economies, synergies of A. Schulman buyout and the polyethylene joint venture with Sasol. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
LyondellBasell has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make this chemical giant an attractive choice for investors right now.
Shares of LyondellBasell have rallied 51.8% over the past year against the 46.2% rise of its industry. It has also outperformed the S&P 500’s roughly 38% rise over the same period.
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Over the past two months, the Zacks Consensus Estimate for LyondellBasell for 2021 has increased around 8.5%. The consensus estimate for 2022 has also been revised 9.7% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
Impressive Earnings Surprise History
LyondellBasell has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 29.8%, on average.
Superior Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for LyondellBasell is 31.4%, above the industry’s level of 11.4%.
LyondellBasell is seeing a recovery in the market environment on the back of reopening of economies globally. It is benefiting from strong consumer-driven demand, a recovery in the durable goods market and sustained healthy demand from the packaging market.
In its first-quarter call, the company said that it anticipates operating at nearly full capacity globally to meet strong demand that is expected to persist owing to low inventories and maintenance downtime across industry. Strong North American integrated polyethylene margins are expected to continue as U.S. producers look to fulfil domestic order backlogs, rebuild inventories and serve export demand.
In the second half of 2021, it is expected that increased mobility will drive higher demand for gasoline and jet fuel, improving margins for its Refining and Oxyfuels & Related Products businesses.
LyondellBasell, in late 2020, also closed the Louisiana-based Integrated Polyethylene Joint Venture (JV) transaction with global integrated chemicals and energy company, Sasol. The JV aligns with LyondellBasell's strategy of investing in high-quality assets in growing markets. The formation of this JV is also part of LyondellBasell’s initiative expand core businesses, while positioning the company to gain from improving economic conditions.
The company should also gain from the high-density polyethylene (HDPE) project. It started a 500,000-ton per year polyethylene plant in Houston in second-quarter 2020. The plant uses its next-generation Hyperzone HDPE technology. The company expects the Hyperzone HDPE plant to generate $170 million of annual EBITDA.
Moreover, the buyout of A. Schulman has also expanded LyondellBasell's compounding business and created a platform for future growth with reach into additional high-growth markets such as automotive, construction materials, electronic goods and packaging. The company should gain from the significant synergies of the acquisition. The integrated business operates as the Advanced Polymer Solutions business segment. A recovery in automotive manufacturing is driving volumes in this segment.
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, ArcelorMittal MT and Univar Solutions Inc. UNVR.
Nucor has a projected earnings growth rate of 386.2% for the current year. The company’s shares have surged around 132% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcelorMittal has an expected earnings growth rate of 1,229.9% for the current year. The company’s shares have surged around 172% in the past year. It currently carries a Zacks Rank #1.
Univar has an expected earnings growth rate of around 35.2% for the current year. The company’s shares have rallied 37% in the past year. It currently carries a Zacks Rank #1.
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ArcelorMittal (MT) : Free Stock Analysis Report
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