On Monday, LyondellBasell Industries (NYSE:LYB), a global plastics, chemicals, and refining company, saw an increase in its price target from $98.00 to $108.00 by Mizuho. The firm kept a Neutral rating on the stock, following the company's reported adjusted EBITDA for the first quarter of 2024, which was in line with market expectations.
The company's adjusted EBITDA for the quarter was $1.1 billion, matching the higher end of the estimates by Morgan Stanley (NYSE:MS) USA and the consensus of B&B. This financial performance comes at a time when the natural gas-based advantage in the industry is considered to be at its peak, yet overall industry volumes are close to recessionary levels.
LyondellBasell described the current global demand for durable goods as "tepid" and indicated that it has not observed any significant improvement in demand from China. The market conditions reflect the challenges faced across the sector, with demand fluctuations influencing company strategies and investor expectations.
Mizuho's updated price target is based on rolling forward to the next twelve months plus one (NTM+1) earnings per share (EPS) and assigning a higher multiple to the stock. The firm's stance remains cautious with a Neutral rating, despite acknowledging LyondellBasell's leading position in the circular plastics sector, alongside Eastman Chemical Company (NYSE:EMN).
The adjustment in the price target reflects a more forward-looking valuation approach, taking into account the company's earnings potential in the coming year. LyondellBasell's leadership in circular plastics, an area of growing importance in the industry, is also a key consideration in the firm's analysis.
InvestingPro Insights
LyondellBasell Industries (NYSE:LYB) has been navigating a complex market, reflected in the mixed signals from its recent financial metrics. Investors looking for a deeper understanding of the company's valuation could consider the adjusted P/E ratio, which stands at a relatively modest 14.28 based on the last twelve months as of Q1 2024. This suggests a more attractive valuation compared to the standard P/E ratio of 15.76. The company's robust dividend yield of 4.9%, as of the start of 2024, combined with a dividend growth of 5.04%, may appeal to income-focused investors, particularly when considering the company's strong return on assets of 5.8% over the same period.
Despite a revenue decline of 14.21% in the last twelve months as of Q1 2024, the company's price has shown resilience with a 1-year total return of 13.81%. This could indicate market confidence in the company's long-term strategy and its position in the circular plastics sector. Additionally, the InvestingPro Fair Value estimation of $110.35 indicates potential upside from the previous close of $99.68, aligning with Mizuho's increased target of $108.00.
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