On Wednesday, Citi revised its price target for LyondellBasell Industries (NYSE:LYB), a major player in the chemicals industry, reducing it to $81 from the previous $92 while maintaining a Neutral rating on the stock. Currently trading at $75.44, the stock sits near its 52-week low of $74.60, significantly below its high of $107.02. According to InvestingPro analysis, LYB appears undervalued based on its Fair Value metrics, with analyst targets ranging from $84 to $115.
The adjustment follows a reassessment of the company's fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA), which Citi now estimates to be approximately $775 million, a decrease of around $190 million from earlier projections.
For context, LYB's last twelve months EBITDA stands at $4.42 billion, with the company maintaining a healthy EV/EBITDA ratio of 6.89x. InvestingPro data shows the company maintains a "GOOD" overall financial health score, particularly strong in profitability metrics.
The reduction in the EBITDA forecast is attributed to insights gathered from a Goldman Sachs conference held two weeks prior, where lower performance in the Olefins & Polyolefins Americas (O&P Americas) and Europe, Asia, and International (EAI) segments was indicated. Citi's analyst pointed out that the revised outlook was influenced by a variety of factors expected to impact the company in 2025.
One of the notable factors influencing Citi's outlook was the unexpected drop in October's Polyethylene (PE) prices, which declined by 3 cents month-over-month, contrary to the stable contract prices reported by major market participants.
Additionally, North American PE demand showed year-over-year improvement in 2024, and LyondellBasell's propylene oxide (PO) and polypropylene (PP) businesses are seen as having significant potential. These segments could act as "coiled springs," poised to capitalize on any resurgence in consumer durables demand.
However, Citi also expressed caution regarding the broader macroeconomic environment and the persistent sluggishness in ethylene/polyethylene (E/PE) margins, which have been factored into the revised estimates.
The need for significant ethylene cracking capacity reductions in Europe to balance supply and demand was also highlighted. Despite these challenges, LYB maintains a robust dividend yield of 7.1% and a conservative P/E ratio of 11.45x. Get comprehensive insights and detailed analysis of LYB's future prospects with InvestingPro's exclusive Pro Research Report, part of our coverage of over 1,400 US stocks.
This need is underscored by strategic reviews and capacity shutdown announcements from various companies in the region, including LyondellBasell, Dow, BASF, Shell (LON:SHEL), Versalis, SABIC, and Exxon (NYSE:XOM), which are all navigating the challenging market landscape.
In other recent news, LyondellBasell Industries reported third-quarter earnings per share of $1.88 and an EBITDA of $1.2 billion.
The company maintains a solid market position with $40.7 billion in revenue and a market capitalization of $26.6 billion. A series of analyst adjustments to price targets for the company have been made following these results, with BMO Capital Markets, Piper Sandler, BofA Securities, Citi, and Jefferies all lowering their targets.
RBC, however, maintains an Outperform rating on LyondellBasell, highlighting its appealing 6.43% dividend yield as an industry-leading figure. In other company developments, LyondellBasell has announced a CFO transition set for 2025, with Agustin Izquierdo slated to succeed the current CFO, Michael McMurray. This is part of LyondellBasell's long-term planning and commitment to internal leadership development.
Finally, the company's strategic initiatives, such as the construction of the MoReTec-1 recycling facility and the planned closure of the Houston refinery, are proceeding as planned, aiming to unlock at least $600 million in annual EBITDA by the end of 2024, with a target of $1 billion by the end of 2025.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.