LyondellBasell

Methodology

LyondellBasell's earnings are highly cyclical with petrochemical spreads, feedstock costs, and global demand, making it critical to use mid-cycle normalized earnings rather than peak or trough figures. Commodity chemical exposure creates extreme profitability swings. Assess sustainable earnings across a complete industry cycle to avoid being misled by temporary conditions.

Methodology

PEG analysis is challenging for LyondellBasell given volatile earnings and periods of negative growth during industry downturns, followed by unsustainably high growth during recoveries. At cycle peaks, low PEG ratios can be dangerously misleading. Focus on price-to-book value and return on capital through the cycle rather than earnings-based metrics for commodity chemical companies.

Methodology

LyondellBasell historically offered attractive dividends and aggressive buybacks during profitable periods, though payouts face pressure during downturns. The dividend policy aims to return substantial cash when earnings are strong. PEGY can look very attractive at cycle peaks but misleads about sustainable returns given earnings volatility.