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What's in Store for LyondellBasell (LYB) in Q3 Earnings?

LyondellBasell Industries LYB is set to release third-quarter 2017 results ahead of the bell on Oct 27.
 
The company’s adjusted earnings came in at $2.82 per share for second-quarter 2017, surpassing the Zacks Consensus Estimate of $2.71.
 
Revenues rose roughly 14.7% year over year to $8,403 million in second-quarter 2017, but lagged the Zacks Consensus Estimate of $8,670.5 million.
 
LyondellBasell has surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average positive earnings surprise of 1.2%.
 
Shares of LyondellBasell have gained 15.6% in the past three months outperforming the industry’s 9% gain.
 
 
Let’s see how things are shaping up for this announcement.
 
Factors to Consider
 
LyondellBasel, in July, said that global olefin and polyolefin industry conditions remain favorable. Healthy olefin and polyolefin market demand is supporting strong global operating rates. With no major maintenance schedule, the company expects to deliver robust performance from its global assets. 
 
Revenues for LyondellBasell’s Intermediates and Derivatives segment for the third quarter is projected to witness a 1.2% decline from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $1,990 million. 
 
LyondellBasell’s Olefins & Polyolefins – Americas segment revenues are expected to inch up 0.9% from the second quarter as the Zacks Consensus Estimate for the third quarter is pegged at $2,571 million. Olefins & Polyolefins – Europe, Asia, International division is expected to witness a 4.3% fall in revenues as the Zacks Consensus Estimate pegged at $2,879 million for the third quarter.
 
The Zacks Consensus Estimate for revenues for the Refining segment is expected to be $1,644 million for the third quarter, reflecting an estimated 4% decline on a sequential basis.
 
The Technology segment’s sales are expected to rise 1.9% sequentially in the third quarter as the Zacks Consensus Estimate pegged at $109 million.
 
LyondellBasell is well-placed to deliver strong volume growth during the second half of 2017. The company is executing its expansion projects to leverage the U.S. natural gas liquids advantage. LyondellBasell's ethylene expansion initiatives should boost capacity and add to its earnings. It also remains committed to boosting shareholder returns by leveraging healthy cash flows.
 
However, LyondellBasell is exposed to volatility in raw material and energy costs that account for a major portion of its operating costs. The low oil price environment remains a headwind for the company.  

LyondellBasell Industries NV Price and EPS Surprise
 
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 -0.98%. This is because the Most Accurate estimate is $2.42 per share while the Zacks Consensus Estimate is pegged at $2.44. 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 #2. Though a Zacks Rank #2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
 
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
 
Stocks With Favorable Combination
 
Here are some companies in the chemical 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: 
 
FMC Corporation FMC has an Earnings ESP of +0.88% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
 
Westlake Chemical Corporation WLK has an Earnings ESP of +5.14% and flaunts a Zacks Rank #1.
 
Ingevity Corporation NGVT has an Earnings ESP of +2.94% and carries a Zacks Rank #2.
 
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FMC Corporation (FMC): Free Stock Analysis Report
 
LyondellBasell Industries NV (LYB): Free Stock Analysis Report
 
Westlake Chemical Corporation (WLK): Free Stock Analysis Report
 
Ingevity Corporation (NGVT): Free Stock Analysis Report
 
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