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LyondellBasell (LYB) Up 3.2% 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 3.2% in that time frame, underperforming 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's Earnings & Sales Miss Estimates in Q3

LyondellBasell logged net profits of $965 million or $2.85 per share in third-quarter 2019 compared with $1,113 million or $2.85 in the year-ago quarter.

Barring one-time items, adjusted earnings came in at $2.70 per share that missed the Zacks Consensus Estimate of $2.78.

LyondellBasell generated revenues of $8,722 million, down roughly 14.1% year over year. The figure also trailed the Zacks Consensus Estimate of $8,983.2 million.

Consolidated EBITDA declined around 12.6% year over year to $1,513 million.

Segment Review

In the Olefins & Polyolefins — Americas division, EBITDA fell around 7.2% year over year to $653 million. Olefin results rose more than $150 million year over year. Polyolefins results dropped around $215 million, mainly due to lower spread in polyethylene over ethylene. The downside was partly offset by increase in polyolefin volume.

EBITDA in the Olefins & Polyolefins — Europe, Asia, International (EAI) segment rose 11.1% year over year to $291 million. Olefin results increased around $75 million on a year-over-year basis on higher margin and volume. Consolidated polyolefins results increased around $10 million mainly on higher volume.

The Advanced Polymer Solutions (APS) segment’s EBITDA was $102 million in the third quarter compared with $70 million in the year-ago quarter.

EBITDA in the Intermediates and Derivatives segment declined around 22.6% on a year-over-year basis to $390 million. Propylene Oxide & Derivatives results declined around $15 million on a year-over-year basis due to modest decline in volume. The downtick was caused by scheduled maintenance.

EBITDA in the Refining segment amounted to a loss of $6 million against profit of $84 million in the year-ago quarter. Crude throughput was 264,000 barrels per day, up 14.3% year over year.

The Technology segment’s EBITDA fell 15.3% year over year to $83 million.

Financials

LyondellBasell had cash and liquid investments of $1.1 billion at the end of the third quarter.

The company paid out dividends of $351 million during third-quarter 2019. As of Sep 30, 2019, the company had 333 million common shares outstanding.

Outlook

The company continued to benefit from low-cost natural gas liquid feedstocks with favorable prices continuing into October 2019. It expects seasonal softening of demand for the remainder of the year.

The company also expects profitability at its Houston refinery to improve during the fourth quarter. Per LyondellBasell, this is likely to be driven by an increase in demand for low-sulfur marine fuels ahead of the IMO 2020 regulation deadline.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.5% due to these changes.

VGM Scores

Currently, LyondellBasell has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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