Why Is LyondellBasell (LYB) Down 12.1% Since Last Earnings Report?

A month has gone by since the last earnings report for LyondellBasell (LYB). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is LyondellBasell due for a breakout? 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 Q1 Earnings Top Estimates, Sales Trail

LyondellBasell logged net profits of $817 million or $2.19 per share in first-quarter 2019, down around 34% from $1,231 million or $3.11 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $2.22 per share for the first quarter, surpassing the Zacks Consensus Estimate of $2.20. The company gained from improved market demand in the quarter.

LyondellBasell recorded revenues of $8,778 million, down roughly 10% year over year. The figure also trailed the Zacks Consensus Estimate of $9,077.9 million.

Consolidated EBITDA declined around 25% year over year to $1,428 million. The company’s olefins and polyolefins margins declined year over year in the quarter.

Segment Review

In the Olefins & Polyolefins — Americas division, EBITDA fell around 32% year over year to $516 million. Olefin results declined by roughly $110 million year over year. Polyolefins results dropped around $120 million, mainly due to lower volumes and a spread decline in polyethylene over ethylene.

The Olefins & Polyolefins — Europe, Asia, International (EAI) segment witnessed a decline in EBITDA of around 29% year over year to $296 million. Olefin results fell roughly $35 million on a year-over-year basis due to lower volumes resulting from an unplanned maintenance. Consolidated polyolefins results declined around $40 million.  

The Advanced Polymer Solutions (APS) segment saw a 20% year over year rise in EBITDA to $148 million, aided by the addition of new product lines from the A. Schulman acquisition. The company is progressing with the integration of the acquisition.
 
EBITDA in the Intermediates and Derivatives segment went down around 20% on a year-over-year basis to $390 million. Propylene Oxide & Derivatives results were affected by lower margins.

EBITDA in the Refining segment declined $78 million year over year. Crude throughput rose 7,000 barrels per day aided by improved reliability.

The Technology segment’s EBITDA rose 48% year over year to $83 million, supported by higher licensing revenues and catalyst sales volumes.

Financials

LyondellBasell had cash and liquid investments of $1.3 billion at the end of the quarter.

The company repurchased 5.6 million shares and paid dividends worth $372 million during the first quarter.

Outlook

LyondellBasell said that it has witnessed signs of industry improvement in the first few weeks of April. Strong market sentiment is driving margins in its Olefins & Polyolefins - EAI segment, the company noted. Moreover, LyondellBasell is seeing volume improvement in its Olefins & Polyolefins – Americas unit. The company is also witnessing an improvement in the refining market with higher gasoline spreads and wider discounts for heavy sour crude oil.

The company noted that it will advance its growth strategy and boost earnings with a strong pipeline of licensing revenues for 2019 as well as the start-up of its world-scale HDPE plant in the third quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, LyondellBasell has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

LyondellBasell has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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