On Monday, Piper Sandler adjusted its price target for shares of LyondellBasell Industries (NYSE:NYSE:LYB), increasing it to $119 from the previous $117, while maintaining an Overweight rating on the stock. The firm's analysis highlighted LyondellBasell's robust results from its olefins and polyolefins business, particularly in the cost-advantaged US market.
LyondellBasell's European olefins and polyolefins segment recently returned to profitability, benefiting from a shift in volume from the Red Sea to continental Europe due to logistical challenges. This move was accompanied by modest price increases in the region. Piper Sandler anticipates this volume shift to be a multi-quarter situation, with European and Asian demand expected to rise, and prices projected to increase gradually to improve margins following a prolonged period of losses.
The firm also forecasts significant margin leverage for LyondellBasell in the future as the company plans to ramp up production rates across its portfolio. Despite lower US operating rates in the first quarter of 2024 due to an extensive maintenance schedule, Piper Sandler predicts a substantial increase in production and earnings from US operations in the second quarter, with further gains in subsequent quarters as moderate price increases take effect.
Piper Sandler's revised earnings estimates show a slight uptick in the 2025 EBITDA projection to $6.2 billion, which is among the highest forecasts on Wall Street for the company. However, this figure still falls short of what the firm considers to be the midcycle earnings potential for LyondellBasell. The new price target of $119 is based on a 7.6x multiple of the forecasted FY25 EBITDA, taking into account an EBITDA of $6.2 billion, net debt of $8.9 billion, and 326 million shares outstanding.
InvestingPro Insights
In light of Piper Sandler's updated price target for LyondellBasell Industries, real-time data from InvestingPro can provide additional context for investors. The company's adjusted market capitalization stands at approximately $33.26 billion, reflecting its significant presence in the industry. With a P/E ratio (adjusted) for the last twelve months as of Q1 2024 at 14.28, LyondellBasell trades at a discount compared to the industry average, suggesting potential for value investment. This is further supported by a PEG ratio of -0.52, which may indicate the stock's earnings growth is not fully reflected in its current price.
InvestingPro Tips highlight the company's robust dividend yield of 4.9% as of the first day of 2024, paired with a dividend growth of 5.04% in the last twelve months as of Q1 2024, which could appeal to income-seeking investors. Additionally, the company's price is at 95.73% of its 52-week high, and with a fair value estimation by InvestingPro at $110.35, there appears to be room for growth.
Investors looking for comprehensive analysis and further insights can find additional InvestingPro Tips on the platform. For those interested in a deeper dive, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With these insights, investors can better gauge LyondellBasell's market position and future potential.
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