LyondellBasell (LYB - Analyst Report) recently delivered better-than-expected first quarter results, prompting analysts to revise their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
First Quarter ResultsLyondellBasell is a plastics, chemicals and refining company that manufactures ethylene, polyethylene, propylene, polypropylene, propylene oxide, oxygenated fuels and acetyls used in packaging, electronics, automotive parts, home furnishings, medical supplies, construction materials and biofuels.
LyondellBasell delivered better-than-expected Q1 results on April 24. Adjusted earnings per share came in at $2.54, crushing the Zacks Consensus Estimate of $1.94. It was a 56% increase over the same quarter last year.
Total revenues declined 26% year-over-year to $8.185 billion due in part to the lower product prices, many of which are correlated with oil prices. However, adjusted operating income surged 30% as the operating margin expanded from 8.5% to 15.0% of revenues. This was due in part to significantly lower input costs and supply and demand tightness in several of its products, which more than offset the impact of lower prices.
Meanwhile, the company spent nearly $1.4 billion in the quarter buying back 15.7 million of its stock, or more than 3% of its outstanding shares.
Estimates Rising
Following better-than-expected Q1 results, analysts revised their estimates significantly higher for both 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
The 2015 Zacks Consensus Estimate has increased from $7.70 before the report to $8.99. The 2016 consensus has increased from $8.65 to $9.54 over the same period. You can see the sharp, unanimous increase in estimates here:
The valuation picture looks very reasonable for LyondellBasell. The Zacks Value Style Score is currently an 'A', and it's easy to see why. The 12-month forward P/E ratio is just 11, and its enterprise value to cash flow ratio is below 10. It also sports a free cash flow yield of 10.5%.Attractive Valuation
The Bottom Line
With expanding profit margins, strong earnings momentum, and attractive valuation, LyondellBasell offers investors a lot to like.
Todd Bunton,
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