KeyBanc has adjusted the financial outlook for Oiln (NYSE: OLN), reducing the price target to $62 from the previous $69 while keeping an Overweight rating on the stock.
The firm's assessment, which came on Monday, follows Oiln's acknowledgment of a challenging second half of the year, which is not expected to show improvement over the first half.
The new EBITDA guidance is set at approximately $940 million, or $1,040 million when excluding the impact of Hurricane Beryl. This forecast is seen as an attainable and attractive level of trough earnings for 2024.
Oiln anticipates that the $100 million impact from Hurricane Beryl will be confined to the third quarter, with operations projected to restart in August. Positive signs in the U.S. caustic soda and epoxy markets, along with stable chlorine prices, contribute to the supportive outlook for Oiln shares. Despite strong demand for Winchester products, the company is experiencing increased costs due to propellant shortages.
KeyBanc acknowledges that the recent guidance reset was a significant point of uncertainty for investors, particularly regarding whether the new CEO would adjust expectations appropriately. The firm commends the management for realigning investor expectations to a more realistic trough level, despite the adjustment coming a quarter later than some might have anticipated.
Oiln has been grappling with operational challenges due to Hurricane Beryl's impact on its Freeport, Texas facility. The company anticipates a $100 million impact on its third-quarter earnings. As a result, it saw changes in the financial outlook from several analyst firms.
For instance, RBC Capital adjusted its price target for Oiln to $52 from $61, maintaining an Outperform rating. Citi revised its price target for Oiln to $51 from $54, while maintaining a Buy rating. JPMorgan upgraded Oiln's stock from Neutral to Overweight, focusing on the company's strategic management of chlorine and caustic soda production.
InvestingPro Insights
As Oiln (NYSE: OLN) navigates through a challenging period, KeyBanc's revised price target takes into account the latest market dynamics. To further contextualize Oiln's financial landscape, real-time data from InvestingPro offers additional insights. With a market capitalization of $5.3 billion and a P/E ratio standing at 19.69, Oiln's valuation suggests a market that is cautiously optimistic about its earnings potential. This is further supported by a slightly lower adjusted P/E ratio for the last twelve months as of Q2 2024, indicating a consistent valuation over time.
InvestingPro Tips highlight that Oiln has been aggressively buying back shares and boasts a high shareholder yield, factors that can be appealing to investors seeking companies with proactive capital management. Moreover, the company's strong free cash flow yield, as implied by its valuation, and the fact that it has maintained dividend payments for over half a century, underscore its financial resilience and commitment to shareholder returns.
While analysts have revised their earnings downwards for the upcoming period, it's important to note that Oiln has been profitable over the last twelve months and is predicted to remain profitable this year. These elements, combined with a history of a strong return over the last five years, may offer a silver lining for long-term investors. For those looking to delve deeper into Oiln's financials, InvestingPro provides an array of additional tips, and users can benefit from a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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