LyondellBasell (LYB) Q4 Earnings: What's in the Cards?

LyondellBasell IndustriesLYB is set to release its fourth-quarter 2016 results ahead of the bell on Feb 3.

Last quarter, the Netherlands-based chemical giant delivered a positive earnings surprise of 0.43%. Revenues fell roughly 11.6% year over year to $7,365 million, but beat the Zacks Consensus Estimate of $7,295 million.

LyondellBasell has surpassed the Zacks Consensus Estimate in three of the trailing four quarters with an average earnings beat of 2.48%.

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

Factors to Consider

LyondellBasell continues to benefit from the favorable North American natural gas environment. The company is executing its expansion projects to leverage the U.S. natural gas liquids (NGLs) advantage. LyondellBasell also remains committed to boosting shareholder returns by leveraging healthy cash flows.

LyondellBasell recently completed the 800 million pounds per year ethylene expansion project at its Corpus Christi, TX, facility. The project expands ethylene capacity at the site by 50% to 2.5 billion pounds per year from 1.7 billion pounds per year.

The conclusion of the expansion at Corpus Christi marks the completion of LyondellBasell's multi-year plan to boost annual ethylene capacity in the U.S. by 2 billion pounds and is also another key milestone in the company's organic profit-generating growth strategy. The company, in 2014, completed an 800-million pound per year expansion at its La Porte, TX site. It also completed a 250-million pound per year expansion at its Channelview facility in 2015.

LyondellBasell is also advancing plans to build a world-scale plant on the U.S. Gulf Coast for producing propylene oxide ("PO") and tertiary butyl alcohol ("TBA"), leveraging the shale gas boom in the region. The new PO/TBA facility, considered to be the largest of its kind, will be built in the Houston area. Moreover, the company has decided to build a high density polyethylene (HDPE) plant on the U.S. Gulf Coast. The facility, which will have an annual capacity of 1.1 billion pounds (500,000 metric tons), will be the first commercial plant to employ the company's new proprietary Hyperzone PE technology.

In the third quarter, there was significant contribution from the company's European olefins and polyolefins business. LyondellBasell expects a slowdown in certain business lines in the fourth quarter due to seasonal changes. The fourth quarter also marks the conclusion of the period of planned maintenance and associated downtime in the olefin and polyolefin assets. However, it is expected to benefit from the past investment in system upgrades, reliability and expansions.

LyondellBasell outperformed the Zacks categorized Chemicals-Diversified industry in the last three months, owing to better-than-expected earnings in the last reported quarter and its expansion plans. The company's shares gained 19.2% during the period while the industry saw a gain of 13%.

Earnings Whispers

Our proven model does not conclusively show that LyondellBasell is likely to beat estimates 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 -0.48%. This is because the Most Accurate estimate stands at $2.06 while the Zacks Consensus Estimate is pegged at $2.07. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : LyondellBasell carries a Zacks Rank #2, which when combined with a negative ESP, makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

LyondellBasell Industries NV Price and Consensus

LyondellBasell Industries NV Price and Consensus | LyondellBasell Industries NV Quote

Stocks to Consider

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:

Albermale Corporation ALB has an Earnings ESP of +2.67% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here

Iamgold Corporation IAG has an Earnings ESP of +100% and a Zacks Rank #1.

Cliffs Natural Resources Inc. CLF has an Earnings ESP of +26.09% and a Zacks Rank #2.

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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.

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

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