Tuesday, BofA Securities adjusted its stance on Olin Corporation (NYSE:OLN) stock, downgrading it from Buy to Neutral. The firm also reduced the price target to $51 from the previous $62. The revision comes as a response to a slower than expected industrial recovery, which is significantly affecting the company's earnings.
BofA Securities highlighted that the projected operating rate recovery for Olin has not transpired as anticipated. Consequently, the firm has revised its price forecasts for chlorine/caustic soda for the year 2025 downward. Additionally, a subdued rebound in the epoxies market after a weak second quarter has contributed to the less optimistic outlook.
The financial institution has also lowered its estimated EBITDA for Olin for the year 2024 to $962 million from $1,148 million. This adjustment is attributed to an almost equal impact from the Freeport, Texas plant outage and a decline in demand and pricing power in the second half of 2024. Looking further ahead, BofA now expects Olin's EBITDA in 2025 to be $1,362 million, a decrease from the previously forecasted $1,551 million.
The new price objective of $51 is based on a multiple of 9 times the estimated 2024 EBITDA, an increase from the earlier multiple of 8.5 times. This change reflects a deeper earnings trough than initially expected. The price target also corresponds to 6.3 times the firm's EBITDA estimate for 2025.
In other recent news, Olin Corporation has faced a series of operational challenges and financial revisions. KeyBanc, RBC Capital, and Citi have adjusted their financial outlooks for Olin, reducing their price targets due to a challenging second half of the year.
The new EBITDA guidance is set at approximately $940 million, or $1,040 million when excluding the impact of Hurricane Beryl. Olin anticipates that the $100 million impact from Hurricane Beryl will be confined to the third quarter, with operations projected to restart in August.
JPMorgan upgraded Olin's stock from Neutral to Overweight, focusing on the company's strategic management of chlorine and caustic soda production. The firm's analysis suggests that Olin's conservative approach to production could lead to a more favorable position in the market. Olin's operations at its Freeport, Texas facility have been temporarily halted due to Hurricane Beryl, and a timeline for resuming operations remains uncertain.
The European Commission has initiated an anti-dumping investigation into epoxy resin imports from China, Korea, Taiwan, and Thailand, following a complaint by the Ad Hoc Coalition of Epoxy Resin Producers, which includes Olin.
Lastly, Olin has appointed Deon Carter as Vice President and President of its Chlor Alkali Products & Vinyls division, a move anticipated to enhance the company's operational model. These recent developments provide valuable insights for investors, reflecting the ongoing dynamics within Olin Corporation.
InvestingPro Insights
Amid the recent downgrade by BofA Securities, Olin Corporation's (NYSE:OLN) market position and financial metrics provide a broader perspective for investors. With a current market capitalization of $5.24 billion and a P/E ratio standing at 19.22, the company shows a valuation that reflects its earnings potential. Notably, Olin's management has been actively buying back shares, a move that often signals confidence in the company's future prospects and can be a positive sign for investors seeking capital appreciation.
Investors may also take interest in the company's long-standing commitment to dividends, having maintained payments for 51 consecutive years, coupled with a strong free cash flow yield. This could be particularly appealing for those looking for stable income streams. Despite the challenges highlighted by BofA Securities, Olin Corporation is trading near its 52-week low, which some investors might view as a potential entry point if they believe in the company's long-term fundamentals.
For those looking to delve deeper into Olin Corporation's financial health and future outlook, InvestingPro offers additional insights. There are 10 more InvestingPro Tips available for Olin Corporation, which can be accessed for further detailed analysis. Interested readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing them with a comprehensive tool to make more informed investment decisions.
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