LyondellBasell IndustriesLYB is set to release fourth-quarter 2017 results ahead of the bell on Feb 2.
The company’s adjusted earnings of $2.41 per share for the third quarter missed the Zacks Consensus Estimate of $2.43. However, revenues increased roughly 15.6% year over year to $8,516 million, beating the consensus mark of $8,090 million.
LyondellBasell has surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missing in the other two with an average positive earnings surprise of 0.9%.
In the past six months, shares of the company have gained 33.2%, outperforming the industry’s 18.3% rally.
Let’s see how things are shaping up for this announcement.
Factors to Consider
LyondellBasell, in its third-quarter call, noted that Hurricane Harvey led to reduced inventories across the petrochemical industry. This has resulted in further delays in the startup of new U.S. ethylene and derivative capacity. The company expects global markets to remain tight to balanced as the industry have worked to rebuild inventories during the fourth quarter.
The Zacks Consensus Estimate for revenues for LyondellBasell for the fourth quarter stands at $8,785 million, reflecting an expected year over year growth of 13.4%.
Revenues for LyondellBasell’s Intermediates and Derivatives segment for the soon-to-be reported quarter is projected to witness a 5.1% rise from the previous quarter as the Zacks Consensus Estimate for the fourth quarter is pegged at $2,182 million.
At the Olefins & Polyolefins – Americas segment, revenues are expected to rise 4.3% from the third quarter as the Zacks Consensus Estimate for the fourth quarter is pegged at $2,554 million. On the contrary, revenues from the Olefins & Polyolefins – Europe, Asia, International division is expected to witness a 4.5% fall as the Zacks Consensus Estimate is projected at $3,011 million for the quarter.
The Zacks Consensus Estimate for revenues from the Refining segment is pegged at $1,700 million for the fourth quarter. This reflects an estimated 1.8% increase on a sequential basis.
The Technology segment sales are expected to rise 18.4% sequentially in the to-be-reported quarter as the Zacks Consensus Estimate stands at $116 million.
The company is benefiting from the favorable North American natural gas environment. It is also executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company’s expansion initiatives are likely to boost the capacity and add to its earnings.
LyondellBasell is constructing a high-density polyethylene (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. Furthermore, the company has started production at its polypropylene (PP) compounding plant in Dalian, China. The 20 kiloton per year plant is the company’s third facility in China. It is strategically located to cater the country’s growing automotive market.
In November, LyondellBasell entered into a definitive agreement to buy 50% interest in Quality Circular Polymers (QCP) — a high standard plastics recycling company located in Sittard-Geleen, Netherlands. Per the agreement, the company will be a 50/50 partner in QCP along with SUEZ — a French company specializing in waste and water management.
The deal combines LyondellBasell's technical capabilities and European market presence with SUEZ's ability to collect and recover waste into new materials. It is likely to provide a strategic platform for sustainable growth.
However, LyondellBasell faces headwind from Hurricane Harvey, which is expected to impact its fourth-quarter results. Hurricane Harvey adversely impacted the company’s nine major U.S. Gulf Coast sites during the previous quarter, which led to the shutdown of an ethylene cracker.
The company’s La Porte ethylene cracker had an unplanned shutdown in the third quarter due to Hurricane Harvey, affecting production and sales volumes in the quarter. LyondellBasell sees lost sales and expenses from Harvey to impact its fourth-quarter 2017 results by roughly $100 million.
The company also expects lost production due to an unplanned maintenance at its ethylene cracker to affect its fourth-quarter results by roughly $40 million.
LyondellBasell Industries NV Price, Consensus and EPS Surprise
Our proven model conclusively shows that LyondellBasell is likely to beat estimates this quarter because it has the right combination of two key ingredients.
Zacks ESP: LyondellBasell has an Earnings ESP of +0.55%. This is because the Most Accurate estimate is $2.52 while the Zacks Consensus Estimate is pegged at $2.50. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: LyondellBasell carries a Zacks Rank #2 (Buy), which when combined with a positive ESP makes us confident of an earnings beat. Note that the stocks with — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) — have significantly higher chance of beating earnings estimates.
Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks With Favorable Combination
Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Agnico Eagle Mines Limited AEM has an Earnings ESP of +20.99% and a Zacks Rank #2.
The Mosaic Company MOS has an Earnings ESP of +4.72% and a Zacks Rank #1.
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