LyondellBasell (LYB +0.9%) is higher after Vertical Research upgrades shares to Buy from Hold with a $93 price target, citing recent share weakness.
Vertical believes LYB's risk/reward is turning more favorable given the likelihood of a more balanced and opportunistic approach to M&A, a "spring loaded" operational profile with various maintenance and expansion projects now complete, and attractive valuation with the highest dividend yield among U.S. chemical stocks at 4.2%.
But today's gain has not fully recouped yesterday's 4% loss when BofA Merrill Lynch downgraded shares two notches to Underperform from Buy with an $80 price target, cut from $100, on the belief that supply growth is set to impact margins.
BofA said the polyethylene industry is over-earning and capacity has accelerated, which will result in global polyethylene supply growth that is expected to exceed demand through 2018.
After a number of large guidance cuts, David Einhorn sees Perrigo's (PRGO -0.2%) earnings forecast as achievable, according to Greenlight Capital's Q1 letter, as reported by Bloomberg.
Another new long is Conduent (NYSE:CNDT), which the Greenlight team sees as burdened with "underearning" contracts it can renegotiate and exit.
Closed shorts include Signet Jewelers (NYSE:SIG), LyondellBasell (NYSE:LYB), and RPC (NYSE:RES). Also closed (with a loss) are shorts in three Canadian lenders after Greenlight's oil and credit loss thesis didn't play out.
Greenlight returned 1.3% after fees in Q1 vs. the S&P 500's 6.1%.
LyondellBasell (LYB +0.6%) is higher despite reporting lower than expected Q4 earnings, as revenues of $7.75B jumped nearly 10% Y/Y even while LYB suffered from some maintenance downtime and operational issues at its 263K bbl/day Houston refinery.
LYB also is continuing to advance but still waiting to give the final go-ahead on plans to build its biggest project ever - a plant to produce 900M lbs./year of propylene oxide and 2B lbs./year of tertiary butyl alcohol and its derivatives.
The company just completed its production expansion of ethylene at its Corpus Christi plant, and is about to start construction at a new $700M polyethylene plastic plant near Houston.
LyondellBasell (NYSE:LYB) says it has completed its project to expand ethylene capacity by 50% to 2.5B lbs./year from 1.7B lbs./year at its complex in Corpus Christi, Tex.
Commissioning of the Corpus Christi expansion concludes LYB's multiyear plan launched in 2012 to increase its overall U.S. ethylene production by 2B lbs./year, which included ~$2B of Gulf Coast investments.
The project follows capacity increases at plants in Illinois and Iowa, and at Texas sites in Channelview, La Porte and Matagorda since 2012.
LYB now says it sees “tremendous value” in the refinery going forward, after it had considered selling the refinery because of weakening profit margins and its place as the only refinery in the company’s global portfolio of chemical and plastics plants.
Valero Energy (VLO -0.7%), Suncor (SU +0.8%) and Saudi Aramco had been rumored as potential buyers of the refinery, which is valued at $1B or more and can process up to 268K bbl/day of crude into gasoline, jet fuel, diesel and other products.
Two top U.S. refining executives are leaving LyondellBasell Industries (LYB -0.6%) as the company nears an agreement to sell its Houston refinery, Reuters reports.
LYB reportedly has been seeking at least $1.5B for the 263K bbl/day refinery on the Houston Ship Channel, the company's only U.S. refinery; Reuters has reported that Valero Energy (VLO +0.2%), Cenvous Energy (CVE -1.1%) and Suncor Energy (SU -0.3%) have expressed interest, but Saudi Aramco says it has not bid on the refinery.
Also, LYB reportedly is working to restore production at the refinery after a Sunday power outage knocked all units out of production; the plantwide power loss is the second this year, and follows a series of smaller outages since January.