On Monday, KeyBanc Capital Markets adjusted its price target for Olin Corporation (NYSE:OLN) shares, reducing it to $50 from the previous target of $56, while maintaining an Overweight rating on the stock.
The company's shares currently trade at $31.51, near their 52-week low of $30.95, with InvestingPro data showing that 8 analysts have recently revised their earnings expectations downward for the upcoming period. The revision follows Olin's management signaling that fourth-quarter EBITDA may reach only the lower end of the projected $170 million to $200 million range. This guidance was shared during the company's investor day held in mid-December.
The lowered EBITDA expectations are attributed to two main factors: challenges in restarting chlorinated organics production at Freeport after Hurricane Beryl and a decline in epoxy demand due to destocking in the electronics sector. However, it was noted that Winchester's performance was in line with expectations.
Despite these challenges, Olin maintains a strong financial position with last twelve months EBITDA of $906.2 million and has demonstrated commitment to shareholder returns through 51 consecutive years of dividend payments, currently yielding 2.58%. Despite these setbacks, caustic soda prices concluded the year on a higher note than midyear projections, a development that KeyBanc views positively.
Caustic soda prices ended the year $35 per ton higher than levels seen in July, defying initial forecasts that they would remain unchanged from the midyear figures. KeyBanc analysts expressed cautious optimism, citing the market's tightness and the possibility of this condition persisting into the first half of 2025. They pointed out that a subdued building and construction environment could dampen demand for PVC and other chlorine derivatives, potentially keeping caustic soda supply limited.
The firm also underscored the modest rebound in caustic soda prices and the faint signs of demand recovery. While acknowledging the challenges faced by Olin, KeyBanc's analysts remain encouraged by the market dynamics and the company's ability to navigate through the current industry landscape. The Overweight rating suggests that KeyBanc continues to see Olin's stock as a favorable investment despite the recent challenges and market conditions.
InvestingPro analysis indicates that Olin is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of this and 1,400+ other US stocks.
In other recent news, Olin Corporation has been the subject of several significant developments. The company announced an increase in its share repurchase program to $2 billion, demonstrating its commitment to shareholder value. Additionally, Olin Corporation has outlined a mid-cycle EBITDA target of $2 billion over the next five years, a significant increase from the estimated $855 million for 2024.
Both KeyBanc Capital Markets and Mizuho (NYSE:MFG) have provided analyst insights on the company's performance. KeyBanc reiterated its Overweight rating on Olin's shares, citing strong operational efficiency and promising market outlook for the chlor-alkali sector. Meanwhile, Mizuho adjusted its outlook for Olin, reducing its price target due to challenging market conditions and anticipated reduction in earnings.
Olin Corporation has also faced leadership changes with the retirement of Dana O’Brien, Senior Vice President and Chief Legal Officer, and the appointment of Angela M. Castle as her successor. Moreover, Olin's chemical segment exceeded expectations due to an increase in caustic soda prices, despite weaker than expected earnings for the second half of 2024, mainly due to hurricane-related disruptions.
Lastly, the company could face additional competition as The Chemours Company (NYSE:CC) announced plans to construct a chlor-alkali production facility.
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