Netherlands-based LydondellBasell Industries, NV (NYSE: LYB – $90.54) said Income from continuing operations, excluding special items, fell to $2.48 per share from $2.54 a year ago, exceeding the $2.28 average estimate from analysts. Revenue meanwhile fell sharply to $6.74 billion from $8.19 billion and missed the $7.08 billion consensus target. Looking at the second quarter, the chemical and refining giant said a significant amount of industry capacity will be offline in both the U.S. and Asia for scheduled maintenance. The company’s Houston oil refinery will operate at reduced rates in the second quarter as repairs to fire damages will take place. Refining and oxyfuels businesses have started to benefit from seasonal margin improvements, however. The company also said it had repurchased 12.3 million shares in the first quarter, or 3% of the outstanding stock.
LYB did not provide any financial guidance for the second quarter or for the remainder of the year, but analysts are expecting the company to earn $9.57 – $9.70 per share for 2016 vs. $9.90 for all of last year. Over the long-term, results should be aided by increasing global demand for petrochemicals, and a more favorable raw material cost savings in the company’s domestic unit stemming from a projected increase in U.S. natural gas supply. I believe the stock has above-average long-term total return potential. Once overcapacity dwindles and sales increase, the bottom line should expand and the share price ought to rebound from current levels. Substantial cash flow generation gives the company many options, including acquiring high-quality companies or other assets and fund continued share repurchases. The shares are very reasonably valued at 9.5 times estimated earnings for the full year and the generous and growing dividend of $3.12 provides aggressive investors a current yield of 3.4%.