On Tuesday, Wells Fargo maintained an Overweight rating on shares of LyondellBasell Industries (NYSE:LYB) and increased the price target to $117 from $105. The adjustment reflects the firm's confidence in the company's performance, citing strong margins and export volumes, along with moderately higher pricing.
These factors are expected to contribute to the company's stability in the year 2024, balancing out weaker results in Refining and Intermediates & Derivatives (I&D) segments.
The new price target is based on a projected enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of approximately 8.5 times for the year 2024, with an adjusted EBITDA forecast of $5.35 billion. However, Wells Fargo also presented a valuation model using a lower, 6.0 times multiple based on its estimated mid-cycle EBITDA of about $7.5 billion.
Wells Fargo also outlined scenarios for LyondellBasell's performance under different market conditions. In a bear case scenario, where global economic challenges are factored in, the firm anticipates an 8% year-over-year decline in EBITDA to $4.8 billion. Conversely, the bull case scenario suggests a potential 7% increase in EBITDA to $5.6 billion compared to the previous year.
The financial institution's analysis concludes that LyondellBasell presents an attractive investment based on valuation. The Overweight rating indicates Wells Fargo's expectation that LyondellBasell will outperform the average total return of the stocks in the analyst's industry coverage universe over the next 6 to 12 months.
InvestingPro Insights
Complementing the analysis by Wells Fargo, current metrics from InvestingPro further illuminate the financial landscape of LyondellBasell Industries (NYSE:LYB). The company's market capitalization stands at a robust $33.12 billion, with a price-to-earnings (P/E) ratio of 15.74, which adjusts to a more favorable 13.06 based on the last twelve months as of Q4 2023. Despite a challenging environment reflected by an 18.52% year-over-year revenue decline in the same period, LyondellBasell still demonstrates a solid dividend yield of 4.9%, which is supported by a recent dividend growth of 5.04%.
InvestingPro Tips suggest that investors consider the company's strong dividend yield and recent price performance, which has seen a 14.62% total return over the last year, indicating resilience in the face of market fluctuations. Additionally, with the next earnings date on April 26, 2024, investors should keep an eye on the company's upcoming financial results for further indicators of performance.
For those looking to delve deeper into LyondellBasell's investment potential, InvestingPro offers even more detailed analysis, with additional tips available to guide investment decisions. Using the coupon code PRONEWS24, readers can access these insights with an extra 10% off a yearly or biyearly Pro and Pro+ subscription, helping to inform a well-rounded investment strategy.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.