LyondellBasell: 12% Divvy Yield But It Is At Risk Of Getting Cut (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• LyondellBasell faces a more structural than cyclical downturn as Chinese capacity additions and below-cost operations for non-economic reasons prolong oversupply in key petrochemical markets, pressuring revenues for several years.
• A declining oil-to-gas price ratio is eroding LyondellBasell’s feedstock cost advantage, and the outlook for oil and gas prices suggests further gross margin pressure ahead.
• LyondellBasell’s free cash flow has turned insufficient to fully cover dividends, and limited liquidity runway raises the likelihood of a dividend reduction to protect its credit profile.
• LyondellBasell trades around sector median forward valuation multiples despite typically warranting a discount, while earnings expectations are trending lower, making the stock look relatively expensive today.
• Technicals show the prior underperformance trend versus the S&P 500 has stalled and downside momentum has weakened, increasing the odds of more sideways price action and performance in line with the market index.

Read the full article here.