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LyondellBasell (LYB) Up 18.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for LyondellBasell (LYB - Free Report) . Shares have added about 18.2% 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 Beats Earnings and Sales Estimates in Q4

LyondellBasell posted profits of $855 million or $2.55 per share in fourth-quarter 2020, up from $612 million or $1.83 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $2.19 cents per share that topped the Zacks Consensus Estimate of $1.31.

Revenues fell 3% year over year to $7,937 million in the reported quarter. However, the figure, beat the consensus mark of $7,154 million.

Consolidated EBITDA increased 20.6% year over year to $1,413 million.

The company witnessed strong consumer-driven demand, industry supply constraints and recovery in durable goods market which reduced the usual year-end slowdown.

Segment Review

In the Olefins & Polyolefins — Americas division, EBITDA increased 45% year over year to $722 million in the reported quarter. Olefins results were driven by ethylene volumes due to higher demand.

The Olefins & Polyolefins — Europe, Asia, International segment witnessed a rise in EBITDA of 111.1% year over year to $304 million. Olefins results were driven by higher margins and volumes. Polyolefins results were higher due to increased polyolefin volumes and polyethylene margin. This was partly offset by lower polypropylene spread.

The Advanced Polymer Solutions segment posted EBITDA $152 million, up from $54 million in the year-ago quarter. Advanced Polymer results remained the same but Compounding & Solutions results increased due to improved margins.

EBITDA in the Intermediates and Derivatives segment fell 20.4% on a year-over-year basis to $262 million. The downside was caused by LIFO inventory changes.

The Refining segment recorded a loss of $72 million in the reported quarter against a profit of $22 million in the year-ago quarter. The Houston Refinery operated at 53,000 barrels per day lower than prior-year quarter’s levels, thanks to lower demand for refined products.

The Technology segment’s EBITDA fell to $45 million in the reported quarter, down 67.4% year over year. The downside was due to lower licensing revenues.

FY20 Results

Earnings (as reported) for full-year 2020 were $4.24 per share compared with $9.58 per share a year ago. Net sales fell 20% year over year to roughly $27.8 billion.

Financials

At the end of 2020, LyondellBasell had cash and liquid investments of $2.5 billion.

In 2020, the company paid out dividends worth $1.4 billion. It also had 334 million common shares outstanding as of Dec 31,2020.

Outlook

The company noted that improving trends seen last month are continuing in the first quarter of 2021. The Olefins and Polyolefins businesses are witnessing strong margins due to increased export demand to China and Latin America. The company formed a new joint venture this month to build its second world-scale propylene oxide and styrene monomer unit in China.

The company looks forward to debt reduction in the near future. It believes that it is well placed to drive profitability through its growth initiatives, which will increase free cash flow and strengthen its investment grade balance sheet.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 35.84% due to these changes.

VGM Scores

Currently, LyondellBasell has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise LyondellBasell has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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