On Monday, BofA Securities adjusted its outlook on LyondellBasell Industries (NYSE:LYB), reducing the price target to $96 from the previous $98 while maintaining a Neutral rating. The revision is attributed to a lowered fourth-quarter EBITDA estimate, now set at $954 million, down from $1,082 million. According to the firm, this decrease is partly due to a drop in the Intermediates & Derivatives (I&D) segment's EBITDA, with the rest spread across most of the company's other segments.
The firm's analyst provided insight into the future, expecting an uptick in the polyethylene (PE) markets, particularly internationally, along with a potential rebound in I&D, primarily driven by improvements in the propylene oxide (PO) market. The analyst also noted that Dow's strategic review of its European polyurethanes assets could potentially benefit LyondellBasell if it results in the closure of PO capacity.
Looking ahead to the next year, BofA Securities continues to model a rise in the PE markets and some recovery in the I&D segment. These projections are part of the rationale behind the firm's adjusted EBITDA forecast for LyondellBasell.
The revision of the 2025 EBITDA estimate also played a role in the new price target. The firm now expects a 2025 EBITDA of $5,259 million for LyondellBasell, a decrease from the previously projected $5,389 million. The price objective remains based on a 7.5x 2025 estimated enterprise value to EBITDA (EV/EBITDA) multiple.
BofA Securities' updated analysis reflects a cautious but steady outlook for LyondellBasell, with specific industry developments and company performance shaping their valuation of the stock.
In other recent news, LyondellBasell Industries reported third-quarter earnings per share of $1.88 and an EBITDA of $1.2 billion, amidst challenging market conditions. Despite a $23 million EBITDA loss in their refining segment, the Olefins and Polyolefins - Americas segment reported a 13% sequential EBITDA increase. KeyBanc maintained its Sector Weight rating on the company's shares, citing ongoing softness in the intermediates and derivatives segment and weak demand for durables.
Citi and Jefferies also adjusted their stances, with Citi reducing the stock price target to $92 from $100, maintaining a neutral stance, and Jefferies lowering the price target to $96 from $101 while maintaining a hold rating.
InvestingPro Insights
LyondellBasell's financial metrics and market performance offer additional context to BofA Securities' analysis. The company's P/E ratio of 12.8 suggests a relatively low valuation compared to earnings, which aligns with the cautious outlook presented in the article. This is further supported by InvestingPro data showing a market cap of $27.45 billion and a price that's currently at 78.85% of its 52-week high.
Notably, LyondellBasell boasts a high dividend yield of 6.19%, with a dividend growth rate of 7.2% over the last twelve months. This could be attractive to income-focused investors, especially given the company's challenging operating environment described in the article.
InvestingPro Tips highlight that LyondellBasell has maintained dividend payments for 13 consecutive years, underscoring its commitment to shareholder returns despite industry headwinds. Additionally, the company's stock is trading at a discount to its fair value of $101.91, as estimated by InvestingPro, which is interestingly close to BofA's revised target of $96.
For readers seeking a deeper dive into LyondellBasell's financials and prospects, InvestingPro offers 14 additional tips that could provide valuable insights for investment decisions.
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