Critical Analysis: CF Industries (NYSE:CF) and LyondellBasell Industries (NYSE:LYB)

LyondellBasell Industries (NYSE:LYB) and CF Industries (NYSE:CF) are both large-cap materials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, dividends, valuation and analyst recommendations.

Valuation & Earnings

This table compares LyondellBasell Industries and CF Industries”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LyondellBasell Industries	$30.15 billion	0.65	-$738.00 million	$3.96	15.36
CF Industries	$7.08 billion	2.55	$1.46 billion	$14.17	8.43

CF Industries has lower revenue, but higher earnings than LyondellBasell Industries. CF Industries is trading at a lower price-to-earnings ratio than LyondellBasell Industries, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

71.2% of LyondellBasell Industries shares are owned by institutional investors. Comparatively, 93.1% of CF Industries shares are owned by institutional investors. 0.1% of LyondellBasell Industries shares are owned by company insiders. Comparatively, 0.5% of CF Industries shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk and Volatility

LyondellBasell Industries has a beta of 0.29, indicating that its stock price is 71% less volatile than the S&P 500. Comparatively, CF Industries has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500.

Profitability

This table compares LyondellBasell Industries and CF Industries’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LyondellBasell Industries	4.06%	21.94%	6.73%
CF Industries	27.48%	24.52%	13.86%

Analyst Ratings

This is a breakdown of current recommendations and price targets for LyondellBasell Industries and CF Industries, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LyondellBasell Industries	3	10	7	1	2.29
CF Industries	3	12	6	1	2.23

LyondellBasell Industries currently has a consensus price target of $73.22, indicating a potential upside of 20.39%. CF Industries has a consensus price target of $122.65, indicating a potential upside of 2.72%. Given LyondellBasell Industries’ stronger consensus rating and higher possible upside, analysts clearly believe LyondellBasell Industries is more favorable than CF Industries.

Dividends

LyondellBasell Industries pays an annual dividend of $2.76 per share and has a dividend yield of 4.5%. CF Industries pays an annual dividend of $2.40 per share and has a dividend yield of 2.0%. LyondellBasell Industries pays out 69.7% of its earnings in the form of a dividend. CF Industries pays out 16.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. LyondellBasell Industries has increased its dividend for 14 consecutive years and CF Industries has increased its dividend for 3 consecutive years. LyondellBasell Industries is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

CF Industries beats LyondellBasell Industries on 10 of the 17 factors compared between the two stocks.

About LyondellBasell Industries

LyondellBasell Industries N.V. operates as a chemical company in the United States, Germany, Mexico, Italy, Poland, France, Japan, China, the Netherlands, and internationally. The company operates in six segments: Olefins and PolyolefinsAmericas; Olefins and PolyolefinsEurope, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology. It produces and markets olefins and co-products, polyethylene, and polypropylene; and propylene oxide and derivatives; oxyfuels and related products; and intermediate chemicals, such as styrene monomer, acetyls, ethylene oxide, and ethylene glycol. In addition, the company produce and markets compounding and solutions including polypropylene compounds, engineered plastics, masterbatches, engineered composites, colors and powders, and advanced polymers including catalloy and polybutene-1; and refines heavy, high-sulfur crude oil and other crude oils, as well as refined products, including gasoline and distillates. Further, it develops and licenses chemical and polyolefin process technologies; manufactures and sells polyolefin catalysts; and serves food packaging, home furnishings, automotive components, and paints and coatings applications. LyondellBasell Industries N.V. was incorporated in 2009 and is headquartered in Houston, Texas.

About CF Industries

CF Industries Holdings, Inc., together with its subsidiaries, engages in the manufacture and sale of hydrogen and nitrogen products for energy, fertilizer, emissions abatement, and other industrial activities in North America, Europe, and internationally. It operates through Ammonia, Granular Urea, UAN, AN, and Other segments. The company's principal products include anhydrous ammonia, granular urea, urea ammonium nitrate, and ammonium nitrate products. It also offers diesel exhaust fluid, urea liquor, nitric acid, and aqua ammonia products. The company primarily serves cooperatives, independent fertilizer distributors, traders, wholesalers, and industrial users. CF Industries Holdings, Inc. was founded in 1946 and is headquartered in Northbrook, Illinois.