Olin Corporation
’s
OLN
shares have shot up around 77% over the past three months. The company is benefiting from investment in the Information Technology (IT) project, the Lake City U.S. Army contract and its productivity actions. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Olin has a Zacks Rank #2 (Buy) and a
VGM Score
of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.
Let’s take a look into the factors that make this chemical maker an attractive choice for investors right now.
An Outperformer
Shares of Olin have surged 157.4% over the past six months against the 41.1% rise of its
industry
. It has also outperformed the S&P 500’s roughly 19% rise over the same period.
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for Olin for 2021 has increased around 142.9%. The favorable estimate revisions instill investor confidence in the stock.
Solid Growth Prospects
The Zacks Consensus Estimate for earnings for the current year for Olin is currently pegged at 68 cents, reflecting an expected year-over-year growth of 127.5%. The company also has an expected long-term earnings per share growth rate of 34.1%, above the industry average of 8.5%.
Valuation Looks Attractive
Olin’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Olin is currently trading at trailing 12-month EV/EBITDA multiple of 6.69, cheaper compared with the industry average of 10.47.
Growth Drivers in Place
Olin, in its third-quarter earnings call, said that it saw sequential pricing improvement during the quarter for chlorine and almost all chlorine derivatives and its newly established Electrochemical Unit (“ECU”). The company expects its price increases for chlorine, epoxy resins, ethylene dichloride, bleach and chlorinated organics to favorably contribute to ECU profit contribution index in the fourth quarter of 2020.
Olin is also expected to gain from cost and other benefits from its investment in the IT project. The company, in 2017, started a multiyear project for implementing a new enterprise resource planning, engineering and manufacturing systems. The project, which involves implementation of necessary IT infrastructure, is expected to maximize cost effectiveness, efficiency and control over its global chemical operations by standardizing business processes. The company completed the IT integration project last year.
The company’s Winchester segment should also benefit from the Lake City U.S. Army ammunition contract. The multi-year contract is expected to significantly boost annual profitability of the unit. The company expects the contract to increase Winchester’s annual revenues by $450-$550 million and adjusted EBITDA by more than $50 million.
Olin also remains committed to improve its cost structure and efficiency and also drive productivity through a number of projects. It expects net productivity gain of $50-$100 million this year.
Olin Corporation Price and Consensus
Olin Corporation price-consensus-chart
|
Olin Corporation Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include
Fortescue Metals Group Limited
FSUGY
,
Impala Platinum Holdings Limited
IMPUY
and
BHP Group
BHP
.
Fortescue has a projected earnings growth rate of 73.5% for the current fiscal. The company’s shares have surged around 173% in a year. It currently sports a Zacks Rank #1. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Impala Platinum has an expected earnings growth rate of 131.7% for the current fiscal. The company’s shares have rallied around 30% in the past year. It currently carries a Zacks Rank #1.
BHP Group has a projected earnings growth rate of 49.1% for the current fiscal year. The company’s shares have gained around 45% in a year. It currently carries a Zacks Rank #1.
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