On Thursday, RBC Capital Markets adjusted its outlook on Olin Corporation (NYSE: NYSE:OLN) shares, reducing the price target from $48.00 to $45.00, while retaining an Outperform rating on the stock. The adjustment comes as the firm anticipates a mixed financial performance for Olin, with certain business segments showing improvement and others facing challenges.
According to InvestingPro data, seven analysts have recently revised their earnings estimates downward, with current analyst targets ranging from $31 to $50 per share.
The analyst from RBC Capital noted a continued weakness in the Epoxy segment of Olin's business but mentioned some improvement in the Chlor Alkali Vinyl (CAV) area. Furthermore, it was highlighted that the strong military sales in the Winchester segment are helping to balance out the weaker commercial sales. This segment performance variability is reflected in the company's financial metrics, with InvestingPro showing relatively weak gross profit margins of 11.67% and a significant revenue decline of 9.9% over the last twelve months.
In light of these observations, RBC Capital has revised its fourth quarter and full-year 2025 EBITDA (earnings before interest, taxes, depreciation, and amortization) estimates for Olin. The new forecast is set at $160 million for the fourth quarter and $1.10 billion for the full year, a decrease from the previous estimates of $175 million and $1.15 billion, respectively.
Olin Corporation has reportedly shifted its strategy to maximize the value of its Electrochemical Unit (ECU). The company has moved away from indexed contract pricing to freely negotiated prices with customers. Management believes this change will enable Olin to set its own prices rather than being dictated by trade indices, thereby reducing the impact of market cyclicality and helping to stabilize chlor-alkali prices.
Despite the revised EBITDA expectations for 2024, which are set at $855 million, reflecting the impact of $135 million in one-time weather-related costs, Olin's forecasted trough EBITDA for fiscal year 2023 stands at $1.1 billion. This figure is noted to be significantly higher than previous trough levels, indicating some resilience in the company's financial performance amidst market fluctuations.
Notably, InvestingPro analysis suggests the stock is currently undervalued, with strong free cash flow yield and an impressive 51-year track record of consecutive dividend payments. For deeper insights into Olin's valuation and financial health metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Olin Corporation has been the subject of several significant developments. BofA Securities upgraded Olin's stock from Neutral to Buy, citing the company's attractive valuation and strong free cash flow yield. The firm also projected a significant rise in Olin's EBITDA in 2025, partly due to expected improvements in demand and higher caustic soda prices.
Simultaneously, KeyBanc Capital Markets maintained an Overweight rating on Olin's shares, adjusting its price target amid a modest rebound in caustic soda prices. KeyBanc expressed cautious optimism about the market's tightness and Olin's ability to navigate the current industry landscape.
In contrast, Mizuho (NYSE:MFG) reduced its price target for Olin, citing challenging market conditions and anticipated reduction in earnings. Despite this, Olin announced a mid-cycle EBITDA target of $2 billion over the next five years, a substantial increase from the estimated $855 million for 2024.
Additionally, Olin has increased its share repurchase program to $2 billion, demonstrating its commitment to shareholder value. The company 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.
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