What Could Drive LyondellBasell’s Revenue in 4Q17?



LyondellBasell’s 4Q17 revenue estimates

LyondellBasell (LYB) is expected to report revenues of $8.8 billion in 4Q17, an increase of 13.3% on a year-over-year basis. In 4Q16, LYB reported revenue of $7.8 billion. Since the beginning of 1Q16, LYB’s revenue has been on an upward trend with the exception of 2Q17, where the revenue went down marginally.

The projected growth in LYB’s revenue is expected to be driven by the volume and price growth across all of its reporting segments with the exception of its technology segment, which has remained stagnant. During the fourth quarter, the volumes are expected to be high, as the inventory levels were impacted due to Hurricane Harvey in the third quarter. The most important factor could be the increase in crude oil prices. In the past one year, the crude oil prices have moved up by approximately 28% from $55 per barrel to $70 per barrel. An increase in oil prices would likely increase LYB’s cost of goods sold as well. Further, the opening of a new polypropylene compounds plant in China could improve the volumes in the region.

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Finally, the continued weakness in the US dollar could boost LYB’s revenue. During the fourth quarter, the US dollar weakened by 1% against the basket of currencies. For the full year, it has declined by approximately 10%. On the other hand, the repairs in the Houston refinery could have an adverse impact on LYB’s 4Q17 revenues.

Investors can indirectly get exposure to LyondellBasell by investing in the iShares U.S. Basic Materials ETF (IYM), which invests 5.3% of its portfolio in LyondellBasell. The fund also provides exposure to PPG Industries (PPG), Eastman Chemical (EMN), and Albemarle (ALB), which have weights of 4.1%, 2.0%, and 1.7%, respectively.


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