What's in the Cards for LyondellBasell (LYB) in Q1 Earnings?

LyondellBasell IndustriesLYB is set to release first-quarter 2018 results ahead of the bell on Apr 27.

The company's adjusted earnings came in at $2.73 per share for the fourth quarter of 2017, beating the Zacks Consensus Estimate of $2.52. Revenues increased roughly 18% year over year to $9,135 million in the quarter, beating the Zacks Consensus Estimate of $8,785 million. The company witnessed higher sales across its segments in the quarter.

LyondellBasell surpassed the Zacks Consensus Estimate in two of the trailing four quarters while missing in the other two, delivering an average positive earnings surprise of 2.14%.

Shares of the company have moved up 21.7% over a year, outperforming the industry 's 9.1% gain.

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

Factors to Consider

LyondellBasell, in its fourth-quarter call, noted that strong global demand and delays in capacity additions across the industry have led to improved outlook for 2018. The company expects to realize the benefits of strong operating rates across its global portfolio of assets and continue to reap profits courtesy of the Houston refinery. The company expects strong contributions from its refinery in 2018 driven by the efforts to improve its reliability and performance.

The Zacks Consensus Estimate for revenues for LyondellBasell for the first quarter stands at $9.4 billion, reflecting an expected year-over-year growth of 11.4%.

Revenues for LyondellBasell's Intermediates and Derivatives segment for the soon-to-be reported quarter is projected to witness a 34.6% rise from the prior-year quarter as the Zacks Consensus Estimate for the first quarter is pegged at $2,291 million.

At the Olefins & Polyolefins - Americas segment, revenues are expected to rise 30.4% from the year-ago as the Zacks Consensus Estimate for the first quarter is pegged at $2,758 million. Revenues from the Olefins & Polyolefins - Europe, Asia, International division is expected to increase 24.2% year over year as the Zacks Consensus Estimate is projected at $3,201 million for the quarter.

The Zacks Consensus Estimate for revenues from the Refining segment is pegged at $1,726 million for the first quarter. This reflects an estimated 80.7% increase on a year over year basis.

The Technology segment sales are expected to fall 6.8% year over year in the to-be-reported quarter as the Zacks Consensus Estimate is $123 million.

LyondellBasell is benefiting from the favorable North American natural gas environment. It 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.

Moreover, LyondellBasell, in February, agreed to buy A. Schulman in a deal worth $2.25 billion. The company, last month, secured the U.S. antitrust clearance for its proposed buyout.

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. The acquisition will enable the company to offer a comprehensive range of innovative solutions to customers. LyondellBasell expects to capture $150 million in run-rate cost synergies within two years.

Moreover, LyondellBasell and SUEZ, last month, completed a transaction that makes them 50/50 partner in the Netherlands-based premium plastics recycling company, Quality Circular Polymers. For many years, LyondellBasell has been witnessing increased demand for reused and recycled plastics, particularly in Europe. The latest move helps the company to create an innovative system that can be scaled as the circular economy grows. The two partners will be able to leverage their respective strengths through this joint business.

However, LyondellBasell's operations remain subject to maintenance outages which is affecting its results. The company expects lost production due to a planned maintenance on one of its two crackers at Channelview during first and second quarter of 2018 to affect its results by roughly $100 million, with half of the impact expected in the first quarter.

Moreover, the U.S. Gulf Coast experienced unusually cold weather during the third week of January 2018, causing disruptions across the industry and affecting the company's assets. LyondellBasell expects these disruptions to reduce its first quarter results by roughly $45 million.

LyondellBasell Industries N.V. Price and EPS Surprise

LyondellBasell Industries N.V. Price and EPS Surprise | LyondellBasell Industries N.V. Quote

Earnings Whispers

Our proven model does not 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 +3.66%. This is because the Most Accurate estimate is $2.90 while the Zacks Consensus Estimate is pegged at $2.80. 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 #4 (Sell), which when combined with a positive ESP, makes surprise prediction difficult.

Note that stocks with a Zacks Rank #4 or 5 (Strong Sell) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

WestRock Company WRK has an Earnings ESP of +2.32% and flaunts a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Univar Inc. UNVR has an Earnings ESP of +2.63% and sports a Zacks Rank #1.

FMC Corporation FMC has an Earnings ESP of +1.43% and carries 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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