On Monday, Goldman Sachs (NYSE:GS) reaffirmed its Neutral rating on Olin Corporation (NYSE: NYSE:OLN) stock, maintaining a price target of $46.00. The firm highlighted Olin's second quarter 2024 adjusted EBITDA of $160 million, which fell short of the Bloomberg consensus of $183 million and was significantly lower than the $315 million recorded in the same period the previous year.
The report noted that Hurricane Beryl had a more substantial impact than initially expected, raising the total cost to Olin from $100 million to $110 million, with $77 million affecting the Chemicals segment and $33 million in Epoxy. Although operations have resumed, an additional $25 million impact is anticipated for the fourth quarter in the Chemical segment.
Goldman Sachs pointed out that Olin's fourth quarter EBITDA guidance, ranging from $170 million to $200 million, is considerably below the consensus expectation of $253 million. A quarter-over-quarter decline is expected across all three business segments. This weaker baseline for the fourth quarter suggests that first half 2025 consensus estimates may be overly optimistic and likely need to be adjusted downward.
In the third quarter, Olin's Chloralkali segment saw a 46% year-over-year decline in EBITDA to $152 million, primarily due to costs and lost sales resulting from Hurricane Beryl. The Epoxy segment reported an EBITDA loss of $29 million, down approximately $15 million year-over-year, including the impact of the hurricane.
Despite a price increase announced on October 1, the firm anticipates challenges in resin volume sales in the U.S. and Europe due to increased Asian production. The Winchester segment's EBITDA was $62 million, down roughly $9 million year-over-year, with expectations for ammunition destocking to continue into the fourth quarter.
Olin's Next Generation Squad Weapon facility project is beginning to ramp up in the fourth quarter, expected to have a dilutive effect on EBITDA margin. The company also anticipates continued propellant cost pressure until more capacity becomes available, with a further increase in costs expected in 2025.
During December's investor day, Olin plans to outline longer-term financial targets but has expressed reluctance to provide annual guidance due to the volatility of its earnings. Consequently, Goldman Sachs suggests that the stock may remain under pressure until Street estimates are revised and investor confidence stabilizes.
In other recent news, Olin Corporation's Q3 earnings were significantly impacted by Hurricane Beryl, resulting in a $110 million hit on EBITDA. Despite these challenges, the chemicals segment of the company exceeded expectations, generating $110 million, due to an increase in caustic soda prices.
However, Winchester's commercial ammunition sales experienced a downturn. The company ended the quarter with $225.9 million in cash and approximately $1 billion in liquidity.
Deutsche Bank (ETR:DBKGn) has revised its price target for Olin Corporation from $48.00 to $45.00, maintaining a Hold rating on the stock. This adjustment comes after Olin's recent earnings release, which did not meet expectations, primarily due to the effects of Hurricane Beryl and lower-than-expected earnings from the Winchester segment.
Olin has provided an EBITDA guidance for Q4 in the range of $170 million to $200 million, which is below the consensus estimate of $245 million.
In upcoming events, Olin's Investor Day, scheduled for December 12, 2024, is eagerly anticipated by investors. The company is expected to discuss strategic goals, financial performance, and potential growth opportunities. This includes the possibility of separating the Winchester business and partnerships with Dow. These are the recent developments for Olin Corporation.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Olin Corporation's financial situation, complementing Goldman Sachs' analysis. The company's market capitalization stands at $4.83 billion, with a P/E ratio of 33.49, reflecting the challenging environment described in the article.
Olin's revenue for the last twelve months as of Q3 2024 was $6.48 billion, showing a 9.9% decline, which aligns with the weaker performance noted in the Goldman Sachs report. The company's gross profit margin of 11.67% underscores the pressure on profitability mentioned in the article.
InvestingPro Tips highlight that Olin has been aggressively buying back shares and has maintained dividend payments for 51 consecutive years, demonstrating a commitment to shareholder returns despite the current headwinds. However, the stock is trading near its 52-week low, which correlates with the recent underperformance and lowered guidance discussed in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Olin Corporation, providing deeper insights into the company's financial health and market position.
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