09 December 2010 17:32 [Source: ICIS news]
“With a sustainable benefit from the ethane advantage, better refining margins and continued demand growth for ethylene and related products, we believe LyondellBasell’s margins could see greater expansion than previously expected,” said BB&T Capital Markets analyst Frank Mitch in a research note.
The analyst raised his 2010 earnings per share (EPS) estimate on the company from $2.20 to $2.30, and his 2011 EPS forecast from $2.50 to $2.65. He also upped his share price target from $30 to $36.
LyondellBasell held its first investor day meeting in New York on 8 December. While the company did not offer any earnings guidance, CEO Jim Gallogly said he expects peak petrochemical market conditions will arise in 3-4 years.
Gallogly and other senior executives also highlighted the company’s cost advantage at its US facilities based on cheap and abundant shale gas.
“LyondellBasell confirmed that [shale gas] is a ‘real’, multi-year phenomena. Drill-to-earn provisions require continued fractionation regardless of economics as part of the land leases,” Mitsch said.
“Currently ethane is in balance, but fractionation capacity is set to continue expanding - favourable for ethylene producers,” he added.
Jefferies & Co analyst Laurence Alexander raised his fourth-quarter EPS estimate on LyondellBasell by 10 cents, to 72 cents, bringing his 2010 forecast to $2.45. For 2011, he expects EPS to rise to $2.65.
“While Q4 [fourth quarter] will likely post a seasonal decline, conditions appear favourable into December and we are slightly more optimistic on both Q4 polyolefin margins and the scope of destocking, which mitigates roughly $60m-$80m [€45m-60m] in headwinds from outages and the strikes in France,” Alexander said.
Despite the higher profit forecasts, shares of LyondellBasell were down 96 cents, or 3.1%, to $29.90 in late morning trading on the New York Stock Exchange.
($1 = €0.75)
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