Can LyondellBasell Continue to Raise Net Profit Margin in 2Q16?



LyondellBasell’s net profit margins

As of July 19, analysts are expecting LyondellBasell’s (LYB) net profit margins to be ~14.6% in 2Q16 as compared to 14.5% in 2Q15 and 14.1% in 1Q16. This implies an increase in margins of approximately eight basis points on a year-over-year (or YoY) basis and an increase in margins of 0.47 percentage points on a sequential basis.

LyondellBasell’s net profit margin has been above 14% since 1Q15 with the exception of 4Q15 where its net profit margin was 11.3%. Analysts are expecting LyondellBasell’s peers like PPG Industries (PPG), Dow Chemical (DOW), and Eastman Chemical (EMN) to post net profit margins of 12%, 8.5%, and 10.9%, respectively. Thus, LyondellBasell’s net profit margins are higher than its peers, as it commands a higher EBITDA (or earnings before interest, taxes, depreciation, and amortization) margin of 24.1%, which is relatively higher in comparison with its peers.

Article continues below advertisement

LyondellBasell’s EPS

As of July 19, analysts are expecting LyondellBasell to report diluted earnings per share (or EPS) of $2.60 in 2Q16 as compared to $2.81 in 2Q15. This implies a decline of 7.5 % on a YoY basis. LyondellBasell has outperformed analyst estimates in the past five quarters. Its aggressive share repurchase program could push up the EPS in a bigger way. During 1Q16, LyondellBasell bought back 12.6 million shares. As of May 11, LyondellBasell’s total outstanding common shares stood at ~426 million. However, investors should note that the company’s additional maintenance cost of $40 million to $70 million will affect the EPS in the range of $0.1–$0.16 per share.

As of July 19, the Vanguard High Dividend Yield ETF (VYM) held 0.32% of its total holdings in LyondellBasell. In the next part, we’ll look into LyondellBasell’s capital expenditure, dividends, and share repurchase program.


More From Market Realist