LyondellBasell Industries (LYB) reported a solid Q1 and expects a significant improvement in Q2, supported by rising polyethylene and polypropylene prices, RBC Capital Markets said in a note Sunday.
Analysts said prices are up about 30 cents per pound for polyethylene and about 20 cents per pound for polypropylene in Q2, with potential for further increases is the Strait of Hormuz remains closed. Management also pointed to potential stronger earnings in its olefins and polyolefins business in Europe, Asia, and international markets, along with lower maintenance costs, according to the note.
"LyondellBasell is yet to see signs of demand destruction in the US/Europe and given depressed durables consumption, LyondellBasell thinks it is unlikely, especially given global polyethylene pricing remains well below the 2021 peak," the analysts said.
For Q2, analysts said they expect about $700 million to $800 million quarter-over-quarter boost from about 30 cents per pound higher polyethylene prices, a $200-300 million increase from 10 cents per pound higher polypropylene prices, and about $85 million from lower downtime.
Overall, RBC now projects full-year 2026 earnings before interest, taxes, depreciation, and amortization at nearly $5.5 billion, up from $3.85 billion previously, and Q2 EBITDA is expected to be around $1.5 billion, up from $1.09 billion previously, while Q3 earnings could exceed $2 billion. The outlook assumes the Strait of Hormuz disruption continues through May, followed by one to three months of normalization considering shipping delays and supply chain issues.
RBC raised its price target on LyondellBasell Industries to $94 from $91, and kept its outperform rating.
Shares of LyondellBasell were up more than 2% in Monday trading.
Price: 76.76, Change: +1.77, Percent Change: +2.35
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