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Will LyondellBasell (LYB) Disappoint this Earnings Season?

LyondellBasell Industries LYB is set to release second-quarter 2017 results ahead of the bell on Jul 28.

Last quarter, the Netherlands-based chemical giant posted a negative earnings surprise of 3.00%. Its adjusted earnings came in at $2.26 per share for the quarter, trailing the Zacks Consensus Estimate of $2.33.

Revenues rose roughly 25% year over year to $8,430 million in the quarter, surpassing the Zacks Consensus Estimate of $7,877 million.

LyondellBasell has surpassed the Zacks Consensus Estimate in two of the trailing four quarters with an average negative earnings surprise of 0.70%.

Shares of LyondellBasell have gained 1% in the last three months, underperforming the industry’s 3.1% gain.


 

Let’s see how things are shaping up for this announcement.

Factors to Consider

LyondellBasell witnessed lower profits in first-quarter 2017, hurt by charges related to debt repayment. Revenues from Olefins & Polyolefins witnessed year-over-year growth in the quarter.

LyondellBasell, in its last earnings call, said that global olefin and polyolefin industry conditions remained favorable. With a lighter maintenance schedule, the company expects to benefit from the full availability of its global assets.

LyondellBasell’s operations are subject to interruptions including maintenance outages, which is affecting its production capacity and results. Planned maintenance at a co-product processing unit at the Channelview facility and the fluid unit at the refinery impacted first-quarter 2017 results by around $210 million. Planned maintenance at the PO/TBA facility in the Netherlands and the Channelview methanol plant is expected to affect results in the company’s Intermediates and Derivatives unit by around $40–$60 million in the second quarter.  

LyondellBasell also faces volatility in raw material and energy costs that account for a major portion of its operating costs. The low oil price environment also remains a headwind for the company. Low oil and fuel prices hurt the company’s refining and oxyfuel margins last year and may remain a headwind this year.

Earnings Whispers

Our proven model does not conclusively show that LyondellBasell is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for LyondellBasell is currently pegged at -6.59%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $2.55 and $2.73, respectively. 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 #4 (Sell). 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 these have the right combination of elements to post an earnings beat this quarter:

The Chemours Company CC has an Earnings ESP of +4.44% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Westlake Chemical Corporation WLK has an Earnings ESP of +5.04% and a Zacks Rank #2.

Iamgold Corporation IAG has an Earnings ESP of +300.00% and carries a Zacks Rank #3.

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LyondellBasell Industries NV (LYB): Free Stock Analysis Report
 
Chemours Company (The) (CC): Free Stock Analysis Report
 
Westlake Chemical Corporation (WLK): Free Stock Analysis Report
 
Iamgold Corporation (IAG): Free Stock Analysis Report
 
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