LyondellBasell Industries (LYB) saw a modestly positive market reaction to weak Q4 results following earlier pre-announcements, but the company's Q1 earnings are expected to remain challenged, RBC said in a Monday note.

The analysts said higher energy costs in Europe, increased US natural gas prices, and supply disruptions caused by Winter Storm Fern are likely to weigh on Q1 earnings. However, stronger US polyethylene pricing and normal seasonal improvements could provide some support, with pricing momentum pointing to a stronger H2.

In intermediates and derivatives, strong Q4 margins are expected to ease in Q1 with higher turnaround costs, partially offset by seasonal strength, while advanced polymer solutions target $500 million in 2027 earnings on improving demand and market share, the analysts said.

On cash flow, LyondellBasell guided to about $1.2 billion in 2026 capital spending and expects roughly $1.5 billion of cash for use, excluding funds set aside for debt repayment. With annual dividend obligations near $1.7 billion, the board may consider a dividend cut by year-end, the analysts added.

The analysts said they are revising their earnings before interest, taxes, depreciation, and amortization estimates for Q1, 2026, and 2027 to $620 million, $3.10 billion, and $3.50 billion, respectively.

RBC raised its price target on LyondellBasell Industries to $51 from $49 while keeping its sector perform rating. Shares of the company rose nearly 8% in recent trading.

Price: 53.74, Change: +3.47, Percent Change: +6.90