LyondellBasell’s (LYB) Q2 Earnings: What’s in the Cards?

LyondellBasell Industries LYB is set to release second-quarter 2018 results on Aug 3, before the opening bell.

In the last reported quarter, the company’s net profit rose 54.5% year over year to $1.2 billion or $3.11 per share. Earnings surpassed the Zacks Consensus Estimate of $2.80.

Revenues increased roughly 16% year over year to $9,767 million, beating the Zacks Consensus Estimate of $9,392 million.

Notably, LyondellBasell surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering an average positive earnings surprise of 5.7%.

The company’s shares have returned 25.4% in the past year compared with the industry’s 6.4% rise.

Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.

Factors at Play

During first-quarter earnings call, LyondellBasell stated that it expects margin improvements in oxyfuels and refining. It also expects to benefit from continued high operating rates in the second quarter. The imbalance between ethylene production and consumption is expected to improve as the downstream derivative units attain full operating rates.

Per the company, strong global demand and higher oil prices continue to support strong polyolefin pricing. The company also noted that polyethylene market continues to be tight and margins are robust.

However, planned maintenance on one of the two crackers at the Channelview facility negatively impacted LyondellBasell’s first-quarter results by roughly $50 million. The company expects a negative impact of roughly $50 million from maintenance in the second quarter.

The Zacks Consensus Estimate for total revenues for the second quarter is pegged at $9.1 billion, reflecting an expected year-over-year growth of 8.4%.

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 for the second quarter is pegged at $2,237 million.

At the Olefins & Polyolefins – Americas segment, revenues are expected to rise 1.8% from the year-ago quarter as the Zacks Consensus Estimate is currently pegged at $2,594 million. Meanwhile, revenues from the Olefins & Polyolefins – Europe, Asia, International division is expected to increase 6.8% year over year as the Zacks Consensus Estimate stands at $3,214 million.

The Zacks Consensus Estimate for revenues from the Refining & Oxyfuels segment is pegged at $2,072 million, reflecting an estimated 21% increase on a year-over-year basis.

The Technology segment sales are expected to rise 6.5% year over year in the to-be-reported quarter as the Zacks Consensus Estimate is $114 million.

Earnings Whispers

Our proven model does not show that LyondellBasell is likely to beat estimates this quarter. 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 the case here as you will see below:

Earnings ESP: Earnings ESP for LyondellBasell is -3.52%. This is because the Most Accurate Estimate is $2.80 and the Zacks Consensus Estimate is currently pegged at $2.90. 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:

Westlake Chemical Corporation WLK has an Earnings ESP of +3.09% and holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Chemours Company CC has an Earnings ESP of +2.38% and carries a Zacks Rank #3.

DowDuPont Inc. DWDP has an Earnings ESP of +0.90% and carries a Zacks Rank #3.

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