LyondellBasell (LYB) Up 29% in a Year: What's Driving It?

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Shares of LyondellBasell Industries N.V. LYB have rallied around 29% over a year. The company has also outperformed its industry 's growth of roughly 8% over the same time frame.  

LyondellBasell, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $45.1 billion and average volume of shares traded in the last three months is around 1,828.9K. The company has expected long-term earnings per share growth of around 9.5%.

Let's take a look into the factors that are driving this chemical maker.

Driving Factors

Forecast-topping earnings performance in the last two quarters, upbeat outlook and strong prospects stemming from the acquisition of A. Schulman, Inc. have contributed to the rally in LyondellBasell's shares.

LyondellBasell saw its profits surge roughly 46% year over year to $1,654 million or $4.22 per share in second-quarter 2018. Adjusted earnings of $3.34 per share topped the Zacks Consensus Estimate of $2.90.

The company's revenues also went up roughly 22% year over year to $10,206 million, also beating the Zacks Consensus Estimate of $9,111.1 million.

LyondellBasell, during its second-quarter earnings call, stated that it is well-positioned to boost earnings over the upcoming quarters on the back of operational and market improvements in Refining, strong performance in Intermediates and Derivatives, the A. Schulman buyout and the start-up of Hyperzone HDPE (high-density polyethylene) plant in 2019. Earnings are expected to benefit from increased profits in its refinery, which is likely to be driven by the impact of new marine fuel regulations in second-half 2019.

LyondellBasell is executing its expansion projects to leverage the U.S. natural gas liquids advantage. The company's expansion initiatives are expected to boost capacity and add to its earnings.

The company is constructing a HDPE plant on the U.S. Gulf Coast that will employ its proprietary Hyperzone PE technology. The facility is expected to have an annual capacity of 1.1 billion pounds. LyondellBasell is also constructing a world scale plant on the U.S. Gulf Coast for producing propylene oxide (PO) and tertiary butyl alcohol (TBA), which will have an annual capacity of 1 billion pounds of PO and 2.2 billion pounds of TBA and its derivatives.

Moreover, LyondellBasell recently completed the acquisition of A. Schulman, Inc., a leading supplier of high-performance plastic compounds, composites and powders. The acquisition creates a premier global provider of advanced polymer solutions with extensive geographic reach, leading technologies and a diverse product portfolio.

The buyout doubles the size of LyondellBasell's existing compounding business. It also creates a platform for future growth with reach into additional high-growth markets such as packaging and consumer products, electronics and appliances, building and construction, and agriculture.

LyondellBasell expects to capture $150 million in run-rate cost synergies within two years. The buyout is also expected to be accretive to earnings within the first full year following its closure.

LyondellBasell Industries N.V. Price and Consensus

LyondellBasell Industries N.V. Price and Consensus | LyondellBasell Industries N.V. Quote

Stocks to Consider

Stocks worth considering in the basic materials space include Celanese Corporation CE , Huntsman Corporation HUN and Air Products and Chemicals, Inc. APD .

Celanese has an expected long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). The company's shares have gained around 21% in a year. You can see the complete list of today's Zacks #1 Rank stocks here .

Huntsman has an expected long-term earnings growth rate of 8.5% and a Zacks Rank #1. The company's shares have rallied around 24% in a year.

Air Products has an expected long-term earnings growth rate of 16.2% and carries a Zacks Rank #2 (Buy). Its shares have gained roughly 15% over a year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: CE , LYB , APD , HUN

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