On Monday, KeyBanc Capital Markets adjusted its outlook on Oiln (NYSE: OLN) shares, a chemical manufacturing company, reducing the price target to $56 from the previous $57, while maintaining an Overweight rating on the stock.
The adjustment follows the company's operational challenges, particularly in its Epoxy and Winchester segments, which have impacted its ability to consistently meet guidance throughout the year.
The KeyBanc analyst expressed surprise at the extent of the operational issues faced by Oiln, noting that the company has struggled with consistency in delivering on its guidance for reasons both within and outside of management's control. Despite these challenges, the analyst sees the risk/reward balance for Oiln as still favorable, citing an improving caustic soda market and the potential for epoxy tariffs as positive factors.
Oiln could benefit from a tight caustic soda market that may persist, even if the recovery in chlorine is slower than expected. The analyst highlighted the possibility of upside risks to the October caustic soda settlement, with market tightness driven by outages and strong export demand. The forecasted increase is around $5 per ton.
The report acknowledged that Oiln would need to demonstrate a few solid quarters to attract broader investor interest, especially as competitors like Formosa and Shintech are expected to expand their capacities in the fourth quarter of 2024. Looking ahead to 2025, KeyBanc anticipates a stronger year for Oiln's earnings, although the projected EBITDA of approximately $1.08 billion is still significantly below the mid-cycle potential of $1.8 to $1.9 billion.
In summary, KeyBanc reiterated its Overweight rating on Oiln shares, citing a favorable risk/reward profile heading into 2025. However, due to a softer earnings forecast, the firm has slightly reduced its price target for the company's stock.
In other recent news, Olin (NYSE:OLN) Corporation faced significant operational disruptions due to Hurricane Beryl, resulting in a $110 million impact on third-quarter EBITDA. Despite these challenges, the company's chemicals segment exceeded expectations, generating $110 million, primarily due to an increase in caustic soda prices.
However, Olin's Winchester segment saw a downturn in commercial ammunition sales. The company ended the quarter with a strong financial position, holding $225.9 million in cash and around $1 billion in liquidity.
Goldman Sachs (NYSE:GS) maintained a neutral rating on Olin's stock, highlighting concerns about the company's fourth-quarter EBITDA guidance, which, at $170 million to $200 million, is significantly below consensus estimates.
Deutsche Bank (ETR:DBKGn) also revised its price target for Olin from $48.00 to $45.00, maintaining a hold rating on the stock. Both firms' assessments were influenced by the impacts of Hurricane Beryl and the lower-than-expected earnings from the Winchester segment.
In the upcoming Investor Day scheduled for December, Olin plans 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 current financial position and market performance. The company's market capitalization stands at $4.83 billion, with a P/E ratio of 33.49, indicating that investors are paying a premium for the stock relative to its earnings. This aligns with KeyBanc's view of a favorable risk/reward profile heading into 2025.
InvestingPro Tips highlight that Olin has maintained dividend payments for 51 consecutive years, demonstrating a commitment to shareholder returns despite operational challenges. This consistency in dividend payments could be attractive to income-focused investors, especially given the current dividend yield of 1.93%.
Another relevant InvestingPro Tip notes that the stock is trading near its 52-week low, which corroborates the operational difficulties mentioned in the KeyBanc report. This could present a potential entry point for investors who share KeyBanc's optimistic outlook for 2025.
It is worth noting that InvestingPro offers 13 additional tips for Olin Corporation, providing a more comprehensive analysis for investors seeking deeper insights into the company's prospects.
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