On Monday (NASDAQ:MNDY), BMO Capital Markets adjusted its outlook on shares of LyondellBasell Industries (NYSE: NYSE:LYB), reducing the price target to $98.00 from the previous $105.00 while sustaining a Market Perform rating.
The firm's analysis followed recent discussions with LYB's management team, including Executive Vice President of Intermediates & Derivatives (I&D) Aaron Ledet, Vice President of I&D Finance & Strategy Marie Herzig, and Head of Investor Relations David Kinney.
During their roadshow, LYB's management addressed several key topics such as the repurposing of their refinery, the divestiture of their European assets, the current state of the general markets, and the progress of their Voluntary Early Retirement Program (VEP). The conversations provided BMO Capital with insights into the company's strategic directions and market positioning.
BMO Capital acknowledged that while LyondellBasell faces certain challenges, including a slower macroeconomic environment and narrowing spreads between light and heavy (L/H) feedstocks, there are also several opportunities on the horizon.
The analyst highlighted the company's potential to lead in circularity—an approach to minimize waste and make the most of resources—as well as the possible benefits from stimulus measures in China and lower interest rates in the U.S.
Despite recognizing these opportunities, the recent earnings commentary prompted BMO Capital to lower its price target. The firm's decision reflects a cautious stance in light of the risks and uncertainties discussed. Nevertheless, the Market Perform rating suggests that BMO Capital believes LyondellBasell is likely to perform in line with the broader market expectations.
In other recent news, LyondellBasell Industries reported third-quarter earnings per share of $1.88 and an EBITDA of $1.2 billion, despite challenging market conditions. Piper Sandler, Citi, KeyBanc, and Jefferies have all adjusted their outlooks for the company.
Piper Sandler reduced its price target to $112, maintaining its Overweight rating, while BofA Securities cut its price target to $96, maintaining a Neutral rating. Citi and Jefferies also reduced their price targets to $92 and $96 respectively, with both firms maintaining a neutral stance.
KeyBanc, on the other hand, maintained its Sector Weight rating on shares of LyondellBasell. The company's strategic initiatives, including the construction of the MoReTec-1 recycling facility and the planned closure of the Houston refinery, continue as planned.
The company aims to unlock at least $600 million in annual EBITDA by the end of 2024, targeting $1 billion by the end of 2025. These recent developments reflect LyondellBasell's strategic focus on disciplined capital allocation and optimizing operations to ensure long-term value.
InvestingPro Insights
LyondellBasell's financial metrics and market performance offer additional context to BMO Capital's analysis. The company's P/E ratio of 12.93 suggests it may be undervalued compared to industry peers, aligning with BMO's cautious but not bearish stance. LyondellBasell's impressive dividend yield of 6.28% and a 7.2% dividend growth rate in the last twelve months as of Q3 2024 highlight its commitment to shareholder returns, which could be attractive to income-focused investors despite the lowered price target.
An InvestingPro Tip notes that LyondellBasell's dividend payments have been consistent, supporting the company's appeal for income investors. Another tip indicates that despite recent challenges, analysts predict the company will remain profitable this year, which may provide some reassurance given the slower macroeconomic environment mentioned in the article.
These insights are just a sample of the valuable information available on InvestingPro, which offers 10 additional tips for LyondellBasell, providing a more comprehensive view of the company's financial health and market position.
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